Cesara Ang vs. Wilson Tan, et al.

[SEC-SICD * CASE NO. 1822. August 20, 1986.] CESARA ANG , petitioner , vs . WILSON TAN, ET AL. , respondents . D E C I S I O N In her petition filed with this Commission, Cesara Ang, through her attorney-in-fact, Loreta Ang Tan, alleged that she and the respondents are all stockholders of Tagbilaran Century Trading, Inc., a corporation organized and existing under the laws of the Philippines; that on January, 1978, the respondents caused the amendment of the Articles of Incorporation of the corporation by increasing its capital stock from P200,000.00 to P800,000.00 and allocated to themselves shares of the increased capital stock without giving the same privilege to the petitioner in proportion to her original holding at the time of the increase; that without the knowledge and consent of the petitioner, her shareholdings were reduced from 50 shares equivalent to P5,000.00 to only 37 shares equivalent to P3,700.00; that respondents, as officers and directors of the corporation, have treated its corporation as their own personal property, the funds of the corporation as their personal funds and the merchandise and business of the corporation as their own personal property and business and the following are specific instances, a) respondent Franklin Tan takes out merchandise of the corporation for sale or delivery to customers in and outside Tagbilaran City, without accounting for the proceeds of the sale and more often than not, appropriate to his own use the proceeds of the sale with the tolerance of the other respondents; b) respondent Vicente Tan, Jr. encashed the following checks from funds of the corporation, which he used for his own personal and private purposes: dctai 1. Metro Bank Check No. 5497578 in the sum of P4,000.00 dated April 22, 1976; 2. Metro Bank Check No. 5431113 dated August 31, 1977 in the sum of P4,200.00; 3. Metro Bank Check No. 5429258 dated August 1, 1977 in the sum of P10,000.00 4. Metro Bank Check No. 5407023 dated April 7, 1976 in the sum of P4,000.00 5. Allied Bank Check No. 309727 dated June 14, 1978 in the sum of P10,000.00 6. Metro Bank Check No. 5429322 dated August 8, 1977 in the sum of P5,300.00; 7. Metro Bank Check No. 5420655 dated February 2, 1977 in the sum of P600.00; 8. Metro Bank Check No. 5418463 dated December 24, 1976 in the sum of P22,500.00; and drew and issued the following checks from funds of the corporation, for purposes other than corporate: 1. IBAA Check No. 16059202 dated May 18, 1977, in the amount of P35,000.00 which he gave to Mario Uy as personal loan without the consent of the Board. 2. Metro Bank Checks No. 5427557 dated July 2, 1977, in the sum of P500.00 and No. 5427540 dated July 26, 1977 in the sum of P404.80 in payment of appliances he brought for his own personal use in his house; 3. Metro Bank Check No. 5427539 dated July 27, 1977 in the amount of P4,000.00 in payment of household furniture he bought for his personal use; 4. IBAA Check No. 16123539 dated August 25, 1979, in the sum of P16,000.00 given to Susana T. Guelan to pay a personal loan obtained from Loreta Ang Tan; 5. Metro Bank Check No. 5429255 dated August 4, 1977 in the amount of P1,900.00 in payment of a lot purchased by him in Victoria Memorial Park, Tagbilaran City; 6. On November 14, 1977, the supplier of lumber of the corporation paid to respondent Tan, Jr. the sum of P38,350.00 as kickback which he pocketed and did not turn over to the corporation; LLphil 7. Respondent Vicente Tan, Jr. has used the corporation to engage in the construction of government projects without authority from the Board and said operation is not reflected in the books of the corporation and the construction of government projects is not one of the purposes of corporation; 8. Respondent Grace Tan, who is in charge of the Tagbilaran Century Trading Store, a division of the corporation, engaged in the retail and wholesale merchandising, never rendered an accounting of the operation of the store, as if the same is her personal and private business using the proceeds for her personal use; 9. Many other cases of alleged fraud and resulting in loss of large sums of money to the damage of the corporation and petitioner. That in breach of trust and with grave abuse of confidence, respondents have used funds of the corporation to purchase and acquire houses and lots located in Tagbilaran and other parts of Bohol which were registered in their names and used as family homes; that no dividends were ever declared although reports of outside auditor disclosed enormous profits earned; that to hide the income of the corporation, respondents, particularly, Tan, Jr. made it appear that the net worth of the corporation was less than P200,000.00 although report of the outside auditor disclosed that the net worth of the corporation is at least P4,000,000.00. In their answer, dated February 18, 1980, respondents specifically denied each and every allegation of the petition and by way of affirmative/special defenses claimed that petitioner, way back in 1963, married an American citizen and migrated to the United States of America without leaving her address in the States; neither did she send communications, sign a proxy or power of attorney to represent her in the corporation; that because of lack of knowledge of her whereabouts, she could not be informed of the amendment to increase the authorized capital stock of the corporation; that petitioner has never been denied her pre-emptive right to subscribe to additional shares nor her shares reduced; that petitioner never showed any interest in the corporation, even not caring to pay her unpaid subscription of 40 shares since 1962; that having married an American citizen, petitioner disqualified herself from subscribing additional shares in view of the fact that the corporation is engaged in retail business; that the drawing, issuance and encashment of checks by respondent Vicente Tan, Jr. were done in furtherance of corporate transactions in his capacity as Manager, authorized by the by-laws and confirmed and ratified by the Board of Directors. Respondents likewise interposed a counterclaim alleging that the petition was filed out of hate against the respondents. On June 23, 1980, respondents filed a motion for admission of amended answer and based on certain stipulations of the parties during the initial preliminary conference hearing and admissions in the pleadings, subsequently filed on August 14, 1980, a motion to dismiss. In the Order, dated September 8, 1980, the motion to admit amended answer was granted and the motion to dismiss denied. The amendments to the answer merely specified for what purposes the several checks enumerated in the petition were used. During the pendency of this case, respondent Susana Gauden died and she was substituted by her heirs. Evidence for the petitioner consisted of the power of attorney executed by Cesara Ang in favor of Loreta Ang Tan authorizing the latter to file this petition (Exh. "A"), the several checks enumerated in the petition (Exhibits "B" to "N") and the testimonies of Asst. City Fiscal Lorenzo Lopena of Tagbilaran City, Loreta Tan and her husband, Benjamin Tan. On the other hand, evidence for the respondents consisted of the deposition of Vicente Tan, Jr. taken before the Presiding Judge of the Municipal Trial Court of the City of Tagbilaran on December 20, 1984 and Exhibits "1" to "8-a" which were all marked during the taking of deposition; Exhibit "9" which is the transcript of records of the deposition; and Exhibits "10" and "11", Orders of the Municipal Trial Court of Tagbilaran, dated December 10, 1984 and January 11, 1985, respectively. Asst. City Fiscal Lorenzo Lopena appeared before Hon. Achilles L. Melicor, Presiding Judge of the City Court of Tagbilaran City during the deposition taking, pursuant to an order of this Commission. He identified the documents he brought with him in compliance with the subpoena duces tecum issued by this Commission consisting of Bank Statements of Tagbilaran Century Trading Corporation with Metro Bank, ledger of the corporation recorded with the Bureau of Internal Revenue, sales journal book, purchase journal and other documents, which documents were submitted to the Fiscal's Office of Tagbilaran City as evidence in the estafa cases filed before said office. Loreta Tan testified that she was authorized to represent Cesara Ang, who is now a resident of the United States by virtue of a power of attorney (Exh. "A"); that Cesara Ang was not given the right to subscribe to additional shares in the increase of capital stock; that when the checks were issued, no voucher to cover the checks was prepared; that Franklin Tan, one of the respondents, peddled goods of the corporation without any inventory and accounting whatsoever; that several checks (Exhibits "B" to "N") were issued without the signature of her husband, Benjamin Tan, who is supposed to be a co-signatory of Vicente Tan, Jr.; that she was not present when all the checks in question were allegedly drawn by respondent Vicente Tan, Jr. The other witness for the petitioner, Benjamin Tan, husband of Loreta Tan, testified that in the late 1976, he was the President of Tagbilaran Century Trading; that the corporation maintains two (2) current deposits, one in Metropolitan Bank and the other in IBAA; that in withdrawals from deposits in the two banks, he and the respondent Vicente Tan, Jr. were supposed signatories but deposits and withdrawals were made by respondent Tan, Jr., alone; that he became aware that checks were encashed by respondent Tan, Jr., alone only when he was already out of the corporation; that when he was the president of the corporation, respondent Tan, Jr. was the general manager; that the corporation, thru respondent Tan, Jr., engaged in the construction of government school buildings and the construction of the Abatan Bridge; that most of the payments for government projects were not entered in the books of the corporation; that respondent Franklin Tan handled the traveling store of the corporation and he never made any accounting of the sales of the traveling store; that respondent Grace Tan was in charge of the retail store of the corporation but had not submitted any report or accounting of the sales of merchandise of said retail stores. On the part of the respondents, Vicente Tan, Jr., in his deposition taken before the Presiding Judge of the Municipal Trial Court of the City of Tagbilaran on December 20, 1984, testified that way back in 1977, he was elected president of Tagbilaran Century Trading , Inc., but before such election, he was the general manager of the corporation; that as president and general manager, he issued checks in payment of debts to creditors and other people and entity; that the checks mentioned in the petition were issued in line with the business of the corporation, some as payments of obligations and others, as payment to creditors; that the issuance of said checks were ratified by two (2) board resolutions; that the said checks were made the subject matter of estafa charges filed by herein complainant against respondent Vicente Tan, Jr. before the City Fiscal's Office of Tagbilaran; that the estafa charges were dismissed and the complainant elevated the dismissal to the Ministry of Justice; that the Ministry of Justice, through Deputy Minister Jesus N. Borromeo, in his letter to the counsel for the complainant dated November 5, 1984, denied the appeal based on the ground that the respondent "was authorized by at least two (2) Board Resolutions to perform the acts complained of"; that while it is true that Grace Tan is in charge of the retail store of the corporation, she rendered an accounting of the proceeds of sales but could not be accepted by the complainants; that Benjamin Tan, husband of Loreta Tan, was formerly connected with the corporation and at one time was the president but because he incurred cash shortage, instead of filing charges against him, the matter was settled when he executed a Deed of Repudiation and Confirmation (Exh. "8") relinquishing and renouncing in favor of the respondents "all his right, interests and participation in said corporation now and hereafter"; that the share of Cesara Ang was never reduced and she was never denied the right to subscribe to additional shares; that Cesara Ang was not able to subscribe to additional shares in the increased capital stock because she married an American, migrated to the United States sometime in 1963 or 1964 without leaving or furnishing her address in the United States. In the pre-trial of this case June 23, 1980, it was admitted by the parties that the share of Cesara Ang remained intact at 50 shares and that she could subscribe to additional shares if she so desires. From the evidence adduced and the admission during the pre-trial it is quite clear that the complainant's shareholdings were never reduced (second cause of action) and she was never denied her right to subscribe to additional shares in the increased capital stock of the corporation (First Cause of Action). llcd As to the charge that respondent Vicente Tan, Jr. encashed checks for his personal and private purpose and drew and issued checks for purposes other than corporate, not only have complainant failed to substantiate the charge but respondent Tan, Jr. had clearly rebutted the accusation 1) with the dismissal of the estafa charges in which said checks are the subject matter thereof (Exh. "6"); 2) the denial of the appeal by the Ministry of Justice (Exh. "7"); and 3) the resolution of the board of directors ratifying and confirming "as legitimate acts in behalf of the corporation" the issuance of the checks in question and other acts of Vicente Tan, Jr. prior to his election as president of the corporation on May 31, 1979. (Exh. "2"). Of the several acts complained of in the petition, the only accusation substantiated and not rebutted at all is that respondent Franklin Tan handled the traveling store of the corporation and he never rendered any accounting of the sales of the traveling store. WHEREFORE, judgment is hereby rendered ordering the respondents: 1. To allow the petitioner to subscribe to additional shares in the increased capital stock of the corporation proportionate to her original 50 shares; within thirty (30) days from finality of this Decision; 2. For the respondent Franklin Tan to render an accounting of the sales of the traveling store of the corporation handled by him furnishing a copy to the petitioners, within thirty (30) days from finality of this Decision. Upon the other hand, for lack of evidence to substantiate the respondents' counter-claim, let this same be, as it is hereby, DISMISSED. LibLex SO ORDERED. (SGD.) FELIPE S. TONGCO Hearing Officer