Urbana S. Bagadiong, et al. vs. Joaquin T. Bagadiong, et al.

[SEC-SICD * CASE NO. 07-98-6019. March 27, 2000.] URBANA S. BAGADIONG, ET AL. , complainants , vs . JOAQUIN T. BAGADIONG, ET AL. , respondents . D E C I S I O N This complaint was instituted by Urbana S. Bagadiong (Urbana), stockholder, director and officer of Graybar Marketing and Electrical Services Corporation (Graybar) for the purpose of obtaining the following reliefs: a annulment of the board of directors' meeting of Graybar held on March 30, 1998 and annulment of the board resolution adopted at said meeting for lack of the requisite notice to complainant Urbana; b. inspection and examination by complainant Urbana of the financial records and books of account of Graybar; c. prevention of respondents and/or their representatives and collectors from further collecting and receiving the receivables and collectibles of Graybar from its clients and debtors, and from further disbursing corporate funds through the issuance of checks until the mortgage obligations of Graybar to the Philippine National Bank (PNB) and Metrobank have been fully paid; d. authorization of complainant Urbana and/or her duly authorized representative, in lieu of respondents, to collect and receive the receivables and collectibles of Graybar from its clients and debtors and to apply the same in payment of the mortgage obligations of Graybar to the PNB and Metrobank; and TDCAIS e. temporary designation of complainant Urbana and respondent Joaquin T. Bagadiong (Joaquin) as the exclusive joint signatories of Graybar in the issuance of corporate checks until the mortgage obligation of Graybar to the PNB and Metrobank have been fully settled. The allegations of complainants in their complaint as well as the averments of respondents in their answer have been recited in this Commission's Order of July 5, 1999 wherein this Commission granted complainants' prayer for the issuance of a preliminary injunction preventing respondents and/or their representatives and collectors from further receiving and collecting the receivables and collectibles of Graybar from its clients and debtors, and at the same time authorizing and empowering complainant Urbana and/or her duly authorized representatives to collect, receive and encash such receivables and collectibles, and to apply the sums so collected, received and encashed in payment and settlement of the mortgage obligations of the corporation to the PNB and Metrobank. The evidence presented by complainants in the hearings on the preliminary injunction have been adopted by them as their evidence in the main case as well. The facts of this case, as established during the hearings on the injunctive relief and as recited in this Commission's Order of July 5, 1999 are as follows: Complainant Urbana and the respondents are all stockholders and directors of Graybar, a corporation engaged in the trading business and registered with this Commission on March 20, 1986; respondent Joaquin Bagadiong is the president and general manager of Graybar, respondent Angeles its corporate secretary and treasurer, and complainant Urbana Bagadiong the assistant manager; the two other directors of Graybar, namely, respondents Agripina T. Bagadiong and Felicitas T. Bagadiong, are the mother and sister of respondent Joaquin, respectively; respondent Joaquin and complainant Urbana are husband and wife, having been married on December 21, 1968; the Bagadiong spouses are estranged and living separately; respondent Joaquin is residing in a rented apartment in Project 4, Quezon City with a mistress whom he has been living with since September 1997; complainant Urbana found out in August 1993 about her husband's affair which began way back in 1988; after the discovery by complainant Urbana of her husband's infidelity the relationship between the spouses deteriorated and eventually became bitter and acrimonious, prompting respondent Joaquin to leave the conjugal home in September 1997; due to the estrangement of the spouses complainant Urbana has been eased out by respondents from the day-to-day operations and management of Graybar, such that complainant Urbana is now in the dark as to the present financial condition of the corporation; although Graybar holds office at the residence of the Bagadiong spouses in Sikatuna Village, Quezon City, the files, records and books of account- of the corporation could no longer be found in said office as the same have been gradually taken out therefrom by respondent Joaquin's sisters, namely, respondent Felicitas and Christine B. Corbantes; complainant demanded from respondents that she be afforded the opportunity to exercise her right as stockholder to inspect and examine the financial records and books of account of Graybar but her demand was ignored; Graybar has an outstanding revolving credit line with the PNB in the amount of P2.5 million and as of May 15, 1998 the outstanding availments of Graybar from the PNB credit line is P1,970,000.00; to secure the payment of the PNB loan Graybar mortgaged to the bank two parcels of land in Quezon City, one of which is the conjugal property of the Bagadiong spouses in Sikatuna Village where the couple have resided for the past 16 years together with their three daughters; owing to the estrangement of the Bagadiong spouses and by reason of the fact that respondent Joaquin no longer resides at the conjugal abode in Sikatuna Village, the latter is no longer-interested in paying off the PNB loan and no longer cares if the property would be foreclosed by the bank; respondent Joaquin told complainant that he prefers to have the conjugal home foreclosed by PNB rather than continue paying the loan inasmuch as he no longer resides thereat; due to non-payment of the loan of Graybar, the conjugal home where complainant Urbana and their daughters are residing and the Marikina property are in imminent danger of being unduly foreclosed; when complainant Urbana was still actively involved in the daily operations and management of Graybar she personally saw to it that the amortization on the PNB loan are paid on time to prevent foreclosure of the mortgage properties; Graybar has another outstanding loan obligation, this time with Metrobank, in the sum of One Hundred Eighty Thousand Pesos (P180,000.00), secured by a parcel of land in Marikina City also owned by the Bagadiong spouses; the last amortization payment made on the PNB loan (before complainant was eased out from the management of Graybar) was in the month of March 1998 which was made by complainant Urbana herself, respondents did not make a single amortization payment on the PNB loan for the period from April 1998 to September 1998 even though they were able to collect from Central Azucarera de Don Pedro, client of Graybar, the total amount of P828,781.27 during the said period; that on August 1998 PNB sent Graybar a demand letter and a statement of account as of August 26, 1998 showing accrued interest and penalties on its loan in the sum of P269,475.44; that said demand was not settled; that in the latter part of October 1998 PNB called up complainant Urbana to remind her of the unpaid obligation of Graybar, prompting her to seek out respondent Joaquin whom she was finally able to contact by telephone on October 27, 1998; that when complainant Urbana mentioned to respondent Joaquin the reminder of PNB regarding the Graybar loan, respondent Joaquin merely replied that "Wala akong pakialam. Kayo ang nakatira, kayo ang magbayad," to avoid earlier foreclosure, the daughter of the Bagadiong spouses, Jenelyn, paid on November 5, 1998 the accumulated interest and penalties on the PNB loan of Graybar in the sum of P259,945.55; on December 2, 1998 complainant Urbana also remitted to PNB another payment on the loan of Graybar in the sum of P103,084.12 which amount was collected by her from Fortune Cement, another client of Graybar; in a letter dated April 19, 1999, received by complainant on April 28, 1999, PNB made a final demand on Graybar for the settlement of its loan, otherwise the property mortgaged would be foreclosed; on March 12, 1999, Metrobank also demanded payment of the accrued interests and penalties on Graybar's loan with the bank; Graybar still has remaining collectible amounting to approximately P1.2 million from its clients; and complainant tried several times to get the board of directors of Graybar to convene to discuss settlement of the PNB loan of Graybar but to no avail. On July 23, 1999 complainant posted a bond in the sum of Fifty Thousand Pesos (P50,000.00) as required by the Order dated July 5, 1999 granting her prayer for preliminary injunction, and on July 28, 1999 the subject writ itself was issued. The Order of July 5, 1999 likewise set the preliminary conference in this case on July 27, 1999. On said date, however, only complainant together with counsel appeared and filed her preliminary conference brief. Respondents and counsel failed to appear and to file the required brief. To give respondents one last chance to appear, the preliminary conference was reset to August 23, 1999 without objection on the part of complainant. On said date, however, respondents and counsel again failed to appear and to file their preliminary conference brief despite due notice. Consequently, upon motion of complainant, respondents were declared as in default and the presentation ex-parte of complainant's evidence was set on September 13, 1999. TAEcCS In time for the August 23, 1999 preliminary conference, complainant filed a motion dated August 20, 1999 wherein she prayed for the following reliefs: WHEREFORE, it is most respectfully prayed that an order be issued: a. directing respondents, especially respondent Joaquin T. Bagadiong, to turn over to petitioner Urbana S. Bagadiong all stocks-in- trade of Graybar which are in his possession and custody; and b. authorizing petitioner Urbana S. Bagadiong to sell and dispose of the stocks-in-trade of Graybar which are in her possession and custody as well as those which are to be turned over to her by respondents, and to apply the funds generated from the sale of the corporate assets in payment and settlement of Graybar's indebtedness to PNB. A copy of said motion was served on respondents' counsel through personal service on August 21, 1999. In an order dated September 14, 1999 this Honorable Commission directed respondents to file, within seven days from receipt of said order, their comment/opposition to the subject motion, after which the same shall be considered submitted for resolution with or without said comment/opposition. However, despite due receipt of a copy of the subject motion and order, respondents failed to file their comment/opposition thereto. At the hearing on September 13, 1999 complainant Urbana testified anew and adduced additional testimonial and documentary evidence establishing the following: that she has undertaken the task of collecting, receiving and encashing the receivables and collectibles of Graybar from its clients and debtors pursuant to the above-mentioned Order of this Honorable Commission dated July 5, 1999 authorizing her to do so (TSN, September 13, 1999, p. 8); that complainant Urbana, however, has encountered difficulty in collecting the receivables of Graybar from its clients and debtors because she does not know the exact amount of the outstanding balances of the obligations of said clients and debtors of Graybar by reason of the fact that the corporate books of account are not in her possession and custody (TSN, September 13, 1999, pp. 8-9); that she has tried to collect from only four clients and debtors of Graybar, namely, Benguet Corporation, Electro Dynamics, Agro Food, and from the business entity run by the Beltran family, because she does not know whether or not the other clients of Graybar still have outstanding accounts with the latter (TSN, September 13, 1999, pp. 9-10); that on August 27, 1999 she was able to collect from Benguet Corporation the sum of only P5,000.00 as evidenced by a check voucher for said amount issued by Benguet Corporation on August 25, 1999 (Exh. "KK"), and that she in turn remitted the same amount to the Philippine National Bank (PNB) in payment for Graybar's obligation with the latter, said payment being evidenced by a miscellaneous ticket issued by PNB on August 30, 1999 (Exh. "LL") (TSN, September 13, 1999, pp. 10-11); that the outstanding obligation of Benguet Corporation to Graybar according to the best of her knowledge is approximately P1.2 million (TSN, September 13, 1999, p. 12); that she also tried to collect from Electro Dynamics but the owner thereof, Mrs. Cuevas, wanted to know before remitting payment the exact amount that Electro Dynamics still owned Graybar; that she told Mrs. Cuevas that she would get the statement of account of Electro Dynamics from the books of account of Graybar in order to be able to tell Mrs. Cuevas the exact amount of the former's obligation to Graybar; that to the best of her knowledge the outstanding obligation of Electro Dynamics to Graybar is anywhere from P175,000.00 to P200,000.00 (TSN, September 13, pp. 13-14); that she also was not able to collect any amount from Agro Food although the latter promised to remit payment to her in September 1999 (TSN, September 13, 1999, p. 15); that the outstanding obligation of Agro Food with Graybar amounts to P120,000.00 based on the account of Agro Food in her custody, the only corporate account in her possession (TSN, September 13, 1999, p. 16-17); that as regards the business entity run by the Beltran family, the latter has proposed to settle its account with Graybar by assigning a parcel of land in favor of the latter (TSN, September 13, 1999, p. 15); that the obligation of the Beltran family to Graybar cannot be less than P100,000.00 (TSN, September 13, 1999, p. 16); that she would be a more effective collector of Graybar's receivables and collectibles if she knew the exact amounts due and owing to Graybar from its clients and debtors, and that she would know so if the records of the various accounts pertaining to the clients and debtors of Graybar were turned over to her (TSN, September-13, 1999 p. 18); that PNB has approved the restructuring of Graybar's outstanding obligation therewith in the sum of P1.97 million (TSN, September 13, 1999, pp. 18-21; Exh. "MM"); that PNB would allow acceleration of the payment of Graybar's loan obligation in the event that Graybar is able to raise funds to settle the loan (TSN, September 13, 1999, p. 22); that aside from collecting the receivables and collectibles of Graybar from its clients and debtors, another way by which Graybar can raise the funds urgently needed to settle its long overdue account with PNB is through the sale of its stocks-in-trade and other assets such as transformers, testing equipment and vehicles (TSN, September 13, 1999, p. 23); that the assets of Graybar which are valuable and would be fairly easy to sell and dispose of would be the three transformers which have been taken by respondent Joaquin (TSN, September 13, 1999 p. 23) and which could be sold for at least P150,000.00 to P160,000.00 each (TSN, September 13, 1999, p. 26); that respondent Joaquin informed her that the subject transformers are being kept at the house of his cousin in Novaliches, Quezon City (TSN. September 13, 1999, p. 28); that in July 1999 she went to the house of respondent Joaquin's cousin in Novaliches and saw for herself that the subject transformers are indeed under the safekeeping and custody of said cousin, but that the transformers are not being kept inside the house of respondent Joaquin's cousin but are placed on the street where they are exposed to sun and rain (TSN, September 13, 1999, p. 29); that as regards the testing equipment taken by respondent Joaquin, the same may not raise a substantial amount when sold by reason of their depreciated condition, these having been acquired some eight years earlier (TSN, September 13, 1999, p. 27); that the other valuable assets of Graybar that could be sold to raise the needed funds to pay PNB are its vehicles consisting of a model 1992 L-200 pick- up, a Toyota Hunter, and the other vehicles being kept in Marikina (TSN, September 13, 1999, pp. 23-24); that of the vehicles mentioned, two are in running condition, namely, the L-200 pick-up and the Toyota Hunter (TSN, September 13, 1999, p. 24); that the L-200 pick-up is in the custody and possession of respondent Joaquin who resides at 58-C Evangelista St., Project 4, Quezon City, while the Toyota Hunter is in the custody and possession of respondent Felicitas who resides in Obando, Bulacan (TSN, September 13, 1999, p. 25); and that as for the stocks-in-trade and assets of Graybar in her possession, an inventory of which she submitted to this Honorable Commission, most of them are very old items that may not even be saleable on account of their depreciated condition (TSN, September 13, 1999, p. 30). From the evidence adduced by complainant, it is evident that her effectiveness as collector of Graybar's receivables and collectibles is being severely hampered by her lack of knowledge and .information as to the current status of the respective accounts of Graybar's clients and debtors. Complainant is uncertain as to the exact number and identities of persons and entities who have outstanding accounts with Graybar and as to the exact amounts of their obligations. In order to remedy her handicap and thereby bring about a more efficient collection of Graybar's receivables and collectibles, there is clearly a pressing need for complainant to be allowed access to the corporate books of account and financial records, or for the same to be turned over to her possession and custody until such time that Graybar's account with the PNB and with Metrobank have been fully settled. However, full collection of Graybar's receivables and collectibles may not be completed soon enough to seasonably settle the corporation's long overdue account with the PNB. Moreover, even assuming the remote possibility that the said receivables and collectibles are fully collected, the amount raised may not be adequate to fully satisfy Graybar's obligations to the PNB and Metrobank. For this reason, this Commission finds merit in complainants' motion of August 20, 1999 wherein she sought the turn over to her of all stocks-in-trade and assets of Graybar in the possession and custody of respondents, especially respondent Joaquin, and the sale of said assets, as well as of those in her own possession and custody, to generate the urgently needed funds. Respondents have been duly furnished a copy of the subject motion but despite opportunity given them to comment on or oppose the same, they did not bother to do so. In her said motion complainant alleged that Graybar ceased operations in the early part of 1998 and is no longer actively engaged in the pursuit of its principal line of business; that by reason of Graybar's non-operation its stocks-in-trade and other assets have been rendered idle and in imminent danger of going to waste by reason of rapid depreciation; that collection by complainant of Graybar's receivables and collectibles has proven vastly inadequate to enable her to pay off Graybar's indebtedness to the PNB; and that instead of going to waste, Graybar's stocks-in-trade and other assets, some of which have limited usefulness and expiry dates, could instead be sold and disposed of to generate the funds needed to settle its account with the PNB. An inventory or list of all the assets and stocks-in-trade of Graybar which are in the possession and custody of complainant Urbana as well as those which are, to the best of complainant Urbana's knowledge, in the possession and custody of respondents, especially respondent Joaquin, was submitted by complainant. On June 16, 1999, by way of compliance with a directive of this Commission issued during the hearing on May 6, 1999. Respondents have been duly furnished a copy of said inventory or list submitted by complainants and filed no comment or objection to the same. Neither did they comply with the subject directive. Furthermore, complainants' Exhibits "EE" to "H" inclusive and their sub-markings show that respondent Joaquin has indeed been taking out stocks-in-trade and other assets of Graybar from the corporation's office premises located at the Bagadiong residence in Sikatuna Village, Quezon City. WHEREFORE, premises considered, judgment is hereby rendered as follows: 1. Directing respondents to allow herein complainant Urbana to inspect and examine the financial records and books of account of Graybar. 2. Ordering respondents to turn over to complainant Urbana all the stocks-in-trade and other assets of Graybar as follows: Quantity Description 1 unit 1992 Mitsubishi L-200 pick-up with plate number TEY-929 1 unit Hunter AUV with plate number PKH-892 3 units Westinghouse distribution transformers, 333 KVA 2 pcs. DSM-63 (GE brand) 1 pc. DS-65 (GE brand) 3 pcs. Westinghouse time overcurrent relay 2 pcs. DS-54 (GE brand) 1 pc. GE negative sequence overcurrent relay 1 pc. Phase directional overcurrent relay (GE brand) 1 pc. Voltage distance relay (GE brand) 1 pc. Time overcurrent relay (GE brand) 6 pcs. Lightning arrester 17 pcs. Primary fuse cut-out Finally, complainant Urbana Bagadiong is hereby authorized to sell and dispose of the stocks-in-trade and other assets of Graybar as may be appropriate and to apply the sums generated or the proceeds thereof in payment of the outstanding obligations of Graybar with the PNB and with Metrobank. SEACTH SO ORDERED. (SGD.) JAMES K. ABUGAN Hearing Officer