Shih v. Fernando

[SEC-SICD * CASE NO. 05-94-4772. March 14, 1995.] ELISEO B. SHIH AND CARLOTA C. SHIH , petitioners , vs .MA. TERESA S. FERNANDO , respondent . D E C I S I O N This is an action for accounting and recovery of share in profits filed by Eliseo B. Shih and Carlota C. Shih, petitioners herein. In support of the foregoing, and insofar as the same is material thereto, petitioners allege that they, together with the respondent Maria Teresa S. Fernando, are the incorporators and stockholders of Post and Lintel Corporation (Corporation for brevity),a corporation duly registered with the Securities and Exchange Commission; that petitioners Eliseo and Carlota Shih, aside from being incorporators and stockholders of the corporation, are also employed therewith as general manager and interior designer respectively, while respondent acted as its president and chief executive officer; that the primary purpose for which the corporation is organized is to engage in the business of Interior design and construction of residential, condominium and commercial buildings, among others; that by virtue of this primary purpose, the corporation entered into several transactions and contracts involving interior design and renovation; that profits were derived by the corporation from these transactions; that sometime in October 1993 respondent sent letters to the clients of the corporation informing them that petitioner Eliseo Shih was no longer authorized to represent the corporation in any transaction whatsoever entered into between himself and the clients; That as general manager of the corporation, Eliseo Shih was authorized to draw allowances in the sum of approximately P 5,000.00 a month; that the drawing of said allowances was stopped by the respondent as a consequence of the letters sent stating that Mr. Shih is no longer authorized to represent the corporation in any transaction; that as part of the agreement among the stockholders of the corporation, an accounting of the profits shall be made after the completion of every project entered into by the corporation; that inspite of the aforesaid agreement, respondent has failed and refused, and still fails and refuses to cause the rendition of an accounting and to deliver the share of the petitioners in the profits of those projects, despite repeated demands to do so; that formal and final demand was made by petitioners through counsel last January 24, 1994, prior to the Institution of the present action; that aside from the prayer for accounting and as consequence of the respondent's acts, this was filed praying that respondent recall all letters sent to the corporation claiming that Eliseo Shih is no longer connected with Post and Lintel Corporation in any capacity whatsoever; that petitioners further pray that respondent restore the right of Mr. Shih to draw allowances as general manager of the corporation, and also to cause respondent to pay accrued allowances and salaries of the petitioners starting from October 1993 up to the time of filing of the instant suit; that petitioners further state in their petition that respondent's acts were marked with gross and evident bad faith, among other things, which caused the former to suffer mental anguish, moral shock and social humiliation for which the respondent should be held liable for moral damages in the sum of P250,000.00 for each petitioner; that by way of example, and to deter others who may be like-minded to act in a similar manner, petitioners also pray for exemplary damages which have been assessed at P 250,000.00 for each petitioner; that due to the unlawful acts of the respondent, petitioners were compelled to file the instant suit and secure the services of counsel for an agreed sum of P100,000.00 for which the respondent should be held liable. On the other hand, respondent was not able to present evidence in view of her failure to file an answer within the reglementary period provided for by the Revised Rules of this Commission, as amended. Hence, all evidence presented by the petitioners herein are deemed ADMITTED and UNCONTROVERTED. Upon consideration of the evidence presented by the petitioners, it has been shown that the respondent is in charge of receipt and disbursement of the funds of Post and Lintel Corporation. The evidence adduced further shows that the corporation entered into contracts with Asia Pacific Capital Equities, Edison Electric Integrated, Ely Lili (Phils.) Inc. Adcoms International, Inc. and Pacific Star, for interior designing and renovation, and photocopies of these contracts now form part of the records of the case. Petitioners have furthermore proven through documentary evidence that a total profit of P3,529,031.30 was derived from the foregoing contracts, with exception of course, to the uncollected outstanding balance of Adcoms International, Inc. with Post and Lintel Corporation worth P358,846.00. Petitioners also have established the fact that Eliseo Shih was eased out by the respondent from the position of General Manager sometime in October of 1993, and that respondent ignored the pleas made by the petitioners, even after formal and final demand was made upon her by the said petitioner. LLphil Upon consideration of the law applicable in the instant case, Sec. 43 of the Corporation Code provides as follows: SECTION 43. Power To Declare Dividends . The Board of Directors of a stock corporation may declare dividends out of the unrestricted retained earnings, which shall be payable in cash, in property or in stock to all stockholders on the basis of the outstanding capital stock held by them ... Stock corporations are prohibited from retaining surplus profits in excess of one hundred (100% percent of their paid in capital stock. .. The Undersigned Hearing Officer finds and so holds that an accounting of funds in the instant case is no longer necessary insofar as the aforementioned transactions are concerned as the same have been properly identified and accounted for by the petitioners themselves, based on the documents they presented. What is necessary however, is declaration of dividends in cash as the aforementioned profits now exceed one hundred (100%) percent of the corporation's paid-up capital stock. It will be recalled that, as far as the Articles of Incorporation of Post and Lintel (Exh. A-1) have shown, the paid-up capital thereof is equivalent to P 32,000.00 out of subscribed capital stock of P125,000.00 and an authorized capital stock of P500,000.00. The said corporation based on the contracts and transactions presented as evidence in this case, has posted an income of P3,529,031.30, or about 11028.22% times the present paid-up capital of P32,000.00. Based on these findings, the retained surplus profits of the subject corporation have now exceeded 100% of its paid-up capital stock. Insofar as the petitioner Eliseo Shih's right to allowances are concerned, the granting of the same is warranted under the premises, as the same is has also been satisfactory proven. Thus, respondent must be held liable to aforementioned petitioner for the sum of P85,000.00, as allowances withheld from him starting October 1993, up to the present. Anent the act of respondent in issuing letters disclaiming that petitioner are no longer connected with Post and Lintel Corporation, the respondent is also hereby directed to CEASE AND DESIST from issuing such communications. Respondents is further directed to immediately restore petitioner Eliseo Shih's status of general manager and rights to draw allowances. It shall be noted that the petitioners did not prove any right of Carlota Shih to salaries regarding her employment as interior designer of Post and Lintel Corporation, and as such no judgment shall be passed thereon. Going now to the issue of damages and attorney's fees, the testimony of the witness Eliseo Shih shall be given credence and consideration in this regard. The testimony in itself, under oath, has satisfactory shown that the respondent's unjustified and unreasonable acts were the proximate cause of the petitioners' mental anguish, serious anxiety, besmirched reputation and wounded feelings, for which moral damages in the reduced sum of P50,000.00 is in order. Insofar as exemplary damages are concerned, it has been sufficiently shown that respondent acted in a wanton, fraudulent, reckless, oppressive and malevolent manner, for which the amount of P20,000.00 shall be granted. Lastly, of the issue of attorney's fees, petitioners were not able to present any written contract which would readily prove that an agreement to pay P100,000.00 was made between themselves and counsel for the latter's legal services. However, on the basis of quantum meruit an amount of P 20,000.00 is awarded to the petitioners as attorney's fee, the same being the reasonable value of the services of their counsel in the prosecution of this case. WHEREFORE, In the light of the foregoing premises, DECISION is hereby rendered: 1. Ordering respondent to immediately recall all letters sent to the clients of Post and Lintel Corporation disclaiming petitioner Eliseo B. Shih as General Manager thereof; 2. Directing respondent to restore petitioner Eliseo B. Shih's right to draw allowances from the corporation as General Manager; 3. Directing the respondent to call, within thirty (30) days from receipt hereof, a Board of Directors meeting of Post and Lintel Corporation, for the purpose of declaring cash dividends; and By was DAMAGES, respondent is hereby ORDERED to pay the petitioners: 1. the sum of P85,000.00 as allowances not paid to petitioner Eliseo B. Shih as general manager of Post and Lintel Corporation; 2. the sum of P50,000.00 as moral damages; 3. the sum of P20,000.00 as exemplary damages; and 4. the sum of P20,000.00 as attorney's fees. Costs against respondent. SO ORDERED. (SGD.) EDUARDO P. BAROT Hearing Officer