Col. Ernesto E. Del Castillo, et al. vs. Mariano Z. Velarde

[SEC-SICD * CASE NO. 2246. September 3, 1985.] COL. ERNESTO E. DEL CASTILLO, ET AL. , petitioners , vs . MARIANO Z. VELARDE , respondent . D E C I S I O N This refers to the case filed by Col. Ernesto S. del Castillo, Jose V. Querijero, Juan S. Sumbillo and Leodegario Guerra against Mariano Z. Velarde, as the incumbent President and controlling stockholder of Aerotech Systems, Inc., to question and seek redress for certain alleged fraudulent and/or unlawful acts which are injurious to the corporation and to petitioners particularly as minority stockholders. In a verified petition filed before this Commission, petitioners alleged that on October 16, 1978, half of their total holdings of fully paid-up common and preferred shares were transferred to respondent for a total price of P100,000.00; that even as respondent has since then assumed and exercised the rights of a majority stockholder, he has failed to pay the agreed transfer price of P100,000.00 notwithstanding repeated demands made by petitioners; that respondents since his assumption of control over the majority interest in Aerotech Systems, Inc., inaugurated a regime of systematically milking the corporation, all in breach of his fiduciary position and relation vis-a-vis Aerotech Systems, Inc.; that within the period between November 8, 1978 and May 31, 1981, respondent made it appear that he had extended loans to the corporation totalling P1,637,482.00; that at about the period above-stated, respondent collected receivables of the corporation totalling P1,441,813.11; that said receivables thus collected were deposited not in the corporation's bank account but to respondent's MBTC Savings Account No. 089-00941-6; that respondent made a series of withdrawals of the deposited receivables of the corporation from said respondent's MBTC Savings Account; that as the corporation's receivables remained deposited with respondent's personal savings account aforesaid, interests were earned and accrued for respondent's personal benefit; that on or about December 31, 1978, Aerotech Systems, Inc., acquired photo-grammetric equipment, surveying apparatus and tools, transportation equipment and office furniture and fixture from Aerotech Surveys, Co., worth some P1.5 million but have now all disappeared from the corporation and funnelled into other firms owned and controlled by respondent; that with the recitals of the aforecited facts and events, petitioner is now seeking the recovery of P100,000.00 as the unpaid purchase price of the shares of stock in Aerotech Systems, Inc., transferred by them to respondent with interest, a true and full accounting of receivables of the corporation collected by respondent from various debtors of the corporation and also other collections, a true and full accounting of loans supposedly given by respondent to Aerotech Systems, Inc., with interest, and the return to Aerotech Systems, Inc., of its photogrammetric equipment, surveying apparatus and tools, transportation equipment, and office furniture and fixture or in default thereof their market value; and that a receiver be appointed to take over the business, assets, affairs, books and records of Aerotech Systems, Inc., preparatory to the dissolution and liquidation of the corporation in accordance with law. LLjur In answer thereto, respondent averred that he became a stockholder of the corporation by virtue of a Deed of Assignment of Subscription made by the petitioners, except Leodegario Guerra, on October 16, 1978; that the amount of P100,000.00 representing the purchase price has been admitted as having been received by the assignors, including the petitioners herein thereby negating the claim of non-payment; that the company at the time respondent acceded to become a stockholder was in financial distress and as such, respondent continuously invested his personal funds through soft and/or unsecured loans as advances to the company to cover corporate obligations, negotiate contracts and other payables; that said loans, credits and/or advances are corporation obligations and, consequently have to be paid out from corporate funds paid to the corporation by its creditors and business contracts; that any such payments made to loans executed by the respondent were and are all legitimate payments; that on November 23, 1978, Aerotech Surveys Company, of which the petitioners except Guerra were partners, as assignor, and respondent Aerotech Systems, Inc., as Assignee, assigned and transferred all rights and interest over survey equipment, including the photogrammetric equipment and surveying apparatus; that since the said properties were on lease-purchase from Far East Chemco Leasing and Finance Corporation and because of payment defaults, the latter filed a civil case at the Court of First Instance of Manila wherein a decision based on a Compromise Agreement was rendered on November 8, 1979; that in the said Compromise Agreement, Aerotech Systems, Inc., acknowledged the termination of the lease-purchase and that the company has no further rights, claims, demands, or interest over the said properties; that subsequently thereafter, herein respondent, in his personal capacity and for himself, acquired right and ownership over the said properties directly from Far East Chemco Leasing and Finance Corporation; that whatever equipment, tools, furniture and other properties now being claimed by petitioners in behalf of the corporation are all properties of respondent; that the finances of the corporation are always subject of regular audit and all money received and paid to and paid by the corporation are all covered by vouchers, receipts and supporting documents; that all loans, advances and credits to the corporation extended by respondent are properly documented; and that there has not been charges or other fees collected which are usurious as claimed by petitioners. Hearings were conducted on petitioners' application for receivership and in the course of the hearing held thereon, both counsel manifested that they are adopting the evidence presented on the incident of receivership as part of their evidence in chief in the main case. From the evidence adduced, both oral and documentary, the following facts with respect to the set of charges have been conclusively established: The herein respondent became a stockholder of Aerotech Systems, Inc., on October 16, 1978, by virtue of a Deed of Assignment (Exh. "1-L") whereby half of petitioners' total holdings of fully paid-up common and preferred shares were transferred by the petitioners to the former for a price of P100,000.00. At the time respondent assumed and exercised his right as majority stockholder, the corporation was in financial distress and it was precisely due to this reason that respondent acceded to become stockholder of the company. Starting from November 8, 1978 up to May 31, 1981, respondent has extended a total of P1,637,482.00 either as soft and/or unsecured loans or advances to the corporation to cover corporate obligations and other payables of the latter, the bulk of which are payments for accumulated interests and penalty charges by Far East Chemco on the delayed payment of amortization of an aircraft and an aerial camera purchased by the corporation. These loans which respondent have extended being corporate obligations where paid out of the corporate funds paid to the corporation by its creditors which are deposited in the personal savings account of respondent Velarde. At the time the personal account of respondent Velarde was opened, petitioners were aware of the set-up since it was adopted per agreement reached between the stockholders and respondent Velarde. And since that time that respondent took active participation in the management of the corporation, there has been withdrawals of check payments from the said personal account where monies of the corporation were being deposited. On November 20, 1978, Aerotech Surveys, Co., represented by its General Manager, petitioner Ernesto E. del Castillo, by virtue of a Deed of Sale with Pacto de retro (Exh. "1-0") assigned and transferred all rights and interest over survey equipment, including the photogrammetric equipment and surveying apparatus to the respondent. But because said properties were on lease-purchase from Far East Chemco Leasing and Finance Corporation coupled with the fact that there were payment defaults, the latter filed a civil case for replevin in the former Court of First Instance of Manila and subsequently thereafter, all the said properties were seized by Far East Chemco Leasing and Finance Corporation pursuant to a seizure order issued by the court. On November 8, 1979, a decision based on a Compromise Agreement was rendered thereon with Aerotech Systems, Inc., acknowledging the termination of the lease-purchase and that it has no further rights, claims, demands or interest under said Lease Contract and Lease schedules. Subsequently, thereafter, respondent, in his personal capacity, acquired the rights and ownership over the said properties directly from Far East Chemco Leasing and Finance Corporation. On March 20, 1979, a Lease Agreement was executed by respondent Velarde in favor of Aerotech Systems for the use of the office equipment and photogrammetric equipment and material. On the basis of the testimony adduced during the hearing as well as the documents presented, this Commission is inclined to believe that the purchase price of the shares transferred from the petitioners has been fully paid. Ironically, from the Deed of Assignment per se, it can readily be verified that the amount of P100,000.00 representing the purchase price has been actually received by the assignor. On this score, therefore, the allegation of non-payment should fall on its own weight considering the fact that the petitioners, by virtue of their attestation as to the actual receipt of the said amount and of the veracity of the terms as contained therein, may no longer dispute and allege any irregularity committed in the execution of the Deed of Assignment. This ratiocination becomes more cogent when we consider the situation in the light of the strong presumption in law as to the regularity in the execution of the Deed of Assignment, there being not an iota of proof to evince that petitioners have been under duress, threat or intimidation when they signed the document. The allegation that respondent since his assumption as majority stockholder has systematically milked the corporation of its funds, appears not supported by the evidence on record. On the contrary, from the facts unravelled during the hearing particularly the copy of the Audit Report on the finances of the corporation submitted both by the petitioners and the respondent, it was clearly shown that it was even respondent, who did his best to salvage the corporation from its precarious financial position by the infusion of fresh capital given either as soft and/or unsecured loans or advances to cover corporate obligations. It is worthy to note at this juncture that the allegations that funds of the corporation were being siphoned for the personal use of the respondent was merely inferred from the circumstance that respondent has opened a personal savings account at the Metropolitan Bank and Trust Co., where receivables of the corporation collected by the respondent were being deposited. Of equal significance is the fact that when respondent opened up his personal account at the MBTC, petitioners were aware of this set-up since it was made pursuant to an agreement reached by the stockholders and respondent Velarde. And since then, there has been withdrawal of check payments from the said personal accounts where from time to time receivables of the corporation are being deposited. The loans extended by respondent to the corporation are corporate obligations and as such should be paid out of the corporate funds. Thus, in line with this arrangement, series of withdrawals were made by respondent from the corporation's receivables deposited in his personal account as payment for the loans extended. All these were indubitably established by testimonial evidence. Journal entries representing loans payable, representation expenses, liquidation damages and advances which were submitted in evidence are eloquent proof to show that all the transaction referred to in the journal vouchers have properly been kept and maintained in accordance with existing procedures. Anent the charge that photogrammetric equipment, surveying apparatus and tools, transportation equipment and office furniture and fixture acquired from Aerotech Survey Co., have all disappeared and funnelled into the other firms owned by respondent, it may be safe to assume that respondent's acquisition of the aforesaid equipment and furniture, in his personal capacity, were all covered by the proper Deed of Sale with pacto de retro. And it may not be amiss to state that all these transactions were made possible because of the Decision rendered by the former Court of First Instance of Manila based on a Compromise Agreement whereby Aerotech Systems, Inc., acknowledges the termination of the lease-purchase with Far East Chemco Leasing and Finance Corporation of said equipment and that it has no further rights, claims, demands or interest under said Lease Contract and lease schedules. As may be gathered from the surrounding circumstances, the acquisition of the said equipment by the respondent was for a valuable consideration and not for free as intimated by the petitioners. It is thus obvious from all the foregoing that respondent Velarde has not personally assumed active management of the corporation. On the contrary, the board has been exercising its regular executive or board functions. Petitioners' allegations, therefore, of alleged mismanagement and the resulting losses remain merely as such and offer no basis for the ancillary remedy of receivership in view of their failure to adduce convincing proof in support thereof. As regards respondent's counterclaim, this Commission is of the view that jurisdiction over the same is legitimately lodged in another forum since the allegations pertaining thereto are all couched in general terms. WHEREFORE, petitioners' prayer for the appointment of a receiver is hereby DENIED and the instant petition is hereby DISMISSED. (SGD.) ANTONIO M. ESTEVES Hearing Officer