Premachem Marketing and Development Corporation, et al. vs. Teresita F. Lopez, et al.

[SEC-SICD * CASE NO. 3793. December 12, 1990.] PREMACHEM MARKETING AND DEVELOPMENT CORPORATION, ET AL. , complainants , vs .TERESITA F. LOPEZ, ET AL. , respondents . D E C I S I O N On June 6, 1990, complainants filed a complaint for liquidation, accounting, and receivership with damages. In support of their complaint, complainants alleged, inter alia, that complainant Premachem Marketing and Development Corporation (PMDC, for brevity) is a duly organized corporation existing under and by virtue of the laws of the Philippines and duly registered with this Commission on May 26, 1987 under SEC Reg. No. 140809; that individual complainants are stockholders of PMDC, and complainants Teresita T. Espinal is a member of the Board of Directors; that respondents are stockholders, officers and/or members of the board of Directors of PMDC; that on or about March 18, 1987, respondent Teresita F. Lopez (hereinafter referred to as respondent Lopez) induced and convinced complainant Arturo E. Balbastro (hereinafter referred to as complainant Balbastro) to go into business of manufacturing, distributing preventive maintenance chemicals, although later on, PMDC went into the marketing of other products or goods; that respondent Lopez represented to complainant Balbastro that she has the requisite technical knowledge and expertise to manufacture said chemicals and/or to market said product or goods; that she convinced complainant Balbastro to provide the necessary capital which the latter advanced whenever requested by her and entrusted to her for the purpose of buying/acquiring the chemicals/goods to meet the order/s of PMDC's customers; that in view of said arrangement, it was agreed by and between respondent Lopez and complainant Balbastro that the share of stock of the company to be formed shall be divided fifty-fifty between the two of them, with their respective representatives/nominees sitting in the Board of Directors; that because of his trust in respondent Lopez, complainant Balbastro agreed to her having four (4) directors in the board, namely: the herein respondents, and his having only one (1) in the person of complainant Teresita T. Espinal, who was elected Secretary-Treasurer, that for control purposes, it was also agreed that there should be two (2) groups of signatories for the bank accounts of PMDC, namely: any one (1) from the group of respondent Lopez and any one (1) from the group of complainant Balbastro; that Savings Accounts were opened for PMDC with the Metropolitan Bank and Trust Company, United Nations Branch, and the Union Bank of the Philippines, Ermita Branch, respectively; that after the incorporation of PMDC and from the start of its business operation, respondent Lopez has been the one running and managing its business in her capacity as President and General Manager, although complainant Balbastro was the only one who provided and advanced the capital for PMDC's business; that as of February 1990, respondent Lopez made it appear that during the preceding four (4) months, the last collection from sales made by PMDC to its customers was in October, 1989, and since then, no collection was made allegedly due to problems being encountered by PMDC with its major customers, namely; National Power Corporation, Land Transportation Office and the Malayan Towage Corporation; that, however, it was discovered that respondent Lopez has been making collections for PMDC from the latter's customers and she had been fraudulently encashing/depositing, not in the aforesaid accounts of PMDC, the collections in the form of checks, drawn payable to the order of PMDC, which she subsequently withdrew fraudulently, with the advice and/or cooperation of the other respondents; that respondent Lopez admitted to complainant Balbastro such fact and also the fact that she has used/converted funds of PMDC to her own personal family use and benefit, thereby dissipating PMDC's funds/assets, to the great prejudice of PMDC itself and the other stockholders like the individual complainants; that respondents have been evasive and delaying the accounting and preparation of the financial statements of PMDC, particularly on matter of receivables and collections, despite demands made by the complainants upon them; that during her last conference with complainant Balbastro, more particularly on March 6, 1990, respondent Lopez expressed her desire to dissolve and liquidate PMDC, acknowledged the advances received by her from complainant Balbastro for the aforementioned specific purpose/s and promised to render an accounting of the business operations of PMDC and to liquidate/settle the amounts which she used or has taken from PMDC's funds on or before March 31, 1990, which promise she failed to fulfill up to the present; that in view of the dissipation and/or embezzlement of PMDC's funds by one or more of the respondents, with the cooperation and/or in conspiracy with one another, it is necessary that a receiver be appointed to guard and/or preserve the same; that as a consequence of respondents' fraudulent acts and failure/refusal to comply with said complainants' demands, and in order to protect their legal rights and interest, complainants have been compelled to institute and prosecute the instant action, thereby entitling them to attorney's fees and expenses of litigation in the sum of not less than P 20,000.00. LLphil In the Order of June 7, 1990, respondents were directed to file their answer within fifteen (15) days from receipt thereof, and the hearing on complainants' prayer for the appointment of a receiver was set on June 14, 1990. On June 8, 1990, respondents received a copy of said Order, together with the complaint. At the hearing of the complainants' application for the appointment of a receiver on June 14, 1990, complainant Balbastro took the witness stand for the complainants, with the understanding that the evidence presented for the appointment of a receiver shall be considered part of complainants' evidence in chief. It was agreed by and between complainant Balbastro and respondent Lopez that the hearing would proceed with the direct testimony of complainant Balbastro in support of the complainants' prayer for the appointment of a receiver, but subject to respondents' right to cross-examination at the next hearing (T.S.N.,June 14, 1990 pp. 2-5). After the direct examination of complainant Balbastro, the hearing was reset to June 22, 1990 at 2:00 o'clock in the afternoon for cross-examination by the respondents (T.S.N.,June 14, 1990 pp. 44-45). On June 18, 1990, the respondents filed a manifestation dated June 14, 1990 that they do not have any objection to the appointment of complainant Balbastro as the receiver of PMDC. On July 6, 1990, the complainants submitted in writing a formal offer of their exhibits dated July 3, 1990, in support of their application for the appointment of a receiver. There being no objection thereto, said exhibits were admitted (Order dated July 6, 1990). Likewise, on July 6, 1990, the complainants filed an ex-parte motion to declare respondents in default dated July 5, 1990. In the order of July 6, 1990, said motion to declare respondents in default was set for hearing on July 26, 1990, and the copy of said Order, together with said ex-parte motion, was ordered to be furnished the respondents who were actually furnished the same on July 10, 1990. On July 9, 1990, an Order was issued appointing complainant Balbastro as receiver of PMDC, effective upon his taking of the oath and filing a bond in the amount of P10,000.00. On August 2, 1990, the complainants filed a Request for Admission, dated July 25, 1990, addressed to the respondents, under the provisions of Rule 26, Rules of Court, in relation to Rule XXIII, Sec. 1, Revised Rules of Procedure in the SEC ,to be answered within ten (10) days from their receipt thereof, of the following: "1. From the time they became members of the Board of Directors of the complainant corporation at the time of its incorporation, they have remained as such members of the Board of Directors and have not resigned or been separated therefrom." "2. From the time of the start of its business operation, complainant corporation was managed by respondent Teresita F. Lopez, with the cooperation and assistance of the other respondents." "3. From the first year of the operation of the business of complainant corporation, respondent Teresita F. Lopez was encashing the checks issued and paid by the customers to the complainant corporation and was using/converting the proceeds thereof for her own personal/family use and benefits, with the knowledge and cooperation of the other respondents." llcd "4. Respondents cooperated with one another in hiding from complainant Balbastro the acts of respondent Teresita F. Lopez described in paragraph 3 so that said complainant would continue advancing sums of money for the operating capital of the complainant corporation." "5. Despite their several promises, the respondents never furnished individual complainants with accounting and/or statement of accounts or inventory of the collectibles of the complainant corporation as repeatedly demanded by the individual complainants." During the hearing held on September 14, 1990, complainants manifested that they are adopting the evidence previously presented in connection with their application for the appointment of a receiver, and orally moved that the matters contained in their request for admission be considered as having been admitted by the respondent for failure to reply thereto under oath as required by the rules. On August 21, 1990, it appearing that up to that time, respondents have not yet filed their answer notwithstanding the fact that the reglementary period within which to file the same had expired on June 23, 1990, and acting upon complainants' motion, respondents were accordingly declared in default. On September 18, 1990, an Order was issued granting complainants' oral motion that the matters contained in their request for admission dated July 25, 1990 be deemed to have been admitted by the respondents. During the hearing held on September 25, 1990, the complainants presented additional evidence to supplement/complete the evidence presented on June 14, 1990, among which is the damage sustained by the complainants by way of attorney's fee in the amount of P20,000.00. On October 3, 1990, the complainants filed a manifestation reiterating their formal offer of exhibits dated July 3, 1990 and praying that exhibits "A","A-I",to "N-I",inclusive, be admitted into the record of the case. On October 5, 1990, an Order was issued, admitting Exhibits "A","A-I" to "N-I",inclusive, for purposes of the merits of the case. From the evidence adduced by the complainants in support of their prayer for the appointment of a receiver, as well as the additional evidence presented by them during the hearing on the merits of this case, it has been clearly established that PMDC was duly organized and registered with the Commission on May 26, 1987 under SEC Registration No. 140809 with the following as incorporators/directors, namely: 1. complainant Teresita T. Espinal 2. respondent Teresita F. Lopez 3. respondent Ayrene F. Lopez 4. respondent Adoracion F. Panganiban 5. respondent Roland M. Fernando (Exh. "A-I") that complainant Teresita T. Espinal is a mere nominee of complainant Balbastro who is a stockholder of PMDC (Exh "B");that complainant Balbastro knows respondent Lopez because she was introduced to him sometime in May 1983 by a very close friend and business associate by the name of Virgilio Calaguas; that respondent Lopez is the sister of respondent Adoracion F. Panganiban who was at one time a partner in the accounting firm of Mr. Calaguas; that respondent Ayrene F. Lopez is the daughter of respondent Lopez, and when she got married, complainant Balbastro was one of the sponsors; that respondent Roland M. Fernando is the brother of respondent Lopez and respondent Adoracion F. Panganiban; that after complainant Balbastro came to know respondent Lopez, the latter proposed to him to put up a business for the manufacture of preventive maintenance chemicals, because according to her she had the technical knowledge or expertise in the manufacture and distribution of said products, although later on, the business was expanded to cover the marketing and distribution of other goods and items, and it was from that time up to sometime in March, 1987 when respondent Lopez was able to convince him to organize PMDC on May 26, 1987; that complainant Balbastro agreed to go into the business with the understanding that she would be the one to provide the technical know-how and he the necessary capital because she does not have the money; that after the incorporation of PMDC, it was their understanding that 50% of its share of stock would be controlled by respondent Lopez and 50% would be controlled by complainant Balbastro, and because of the latter's trust in respondent Lopez, he agreed that of the five members of the board, four (4) would come from her group and only one (1) would represent him in the person of complainant Teresita T. Espinal who was latter on elected as Secretary-Treasurer, while respondent Lopez was elected as President and General Manager of PMDC; that the running or management of the affairs of PMDC was entirely in the hands of respondent Lopez, with the cooperation and assistance of the other respondents, and that the books and records of account of PMDC were entrusted to respondent Adoracion F. Panganiban, who is a sister of respondent Lopez; that complainant Balbastro made advances and entrusted to respondent Lopez sums of money for the operation of the business, leaving a balance of P369,303.09 unliquidated as admitted by said respondent herself (Exh. "D"). Respondents are deemed to have admitted that they are members of the Board of Directors of PMDC from the inception of its organization up to the present and that they cooperated and abetted in the perpetration of fraud and embezzlement by respondent Lopez and they conspired and cooperated with her in hiding such fraudulent acts from complainants so that complainant Balbastro would continue making advances to respondent Lopez. Respondents are therefore guilty of such tortious acts for which they are jointly and severally liable to the complainants. Respondents are guilty of bad faith in directing the affairs of the corporation and/or when they acquired personal or pecuniary interest in conflict with their duty as such directors. Hence, they shall be held liable jointly and severally for all damages resulting therefrom suffered by PMDC, its stockholders and other persons. The Corporation Code expressly provides as follows: "SECTION 31. Liability of directors, trustees or officers . Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors, or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons. When a director, trustee or officer attempts to acquire or acquires, in violation of his duty, any interest adverse to the corporation in respect of any matter which has been reposed in him in confidence, as to which equity imposes a disability upon him to deal in his own behalf, he shall be liable as a trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation." In cooperating and conspiring with respondent Lopez in embezzling the funds of the corporation, the other respondents are equally guilty with her in the commission of such tortious act which directly conflicts with the interest of the corporation. Respondents are liable to the complainant corporation for the amount of P369,303.09 which they embezzled and said amount should be paid to complainant Balbastro for the advances which he admittedly made to the corporation (Exhibit "D"). On the nature of the liability of two or more persons for torts or quasi-delict, the Civil Code expressly provides as follows: "ARTICLE 2194. The responsibility of two or more persons who are liable for quasi-delict is solidary." Regarding the right to recover attorney's fee, complainants have the right to be awarded attorney's fee in this case inasmuch as the respondents acted in gross and evident bad faith in refusing to satisfy complainants' plainly valid, just and demandable claim (Article 2208, par. (5), Civil Code). ACCORDINGLY, judgment is hereby rendered in favor of the complainants against the respondents, ordering the respondents to pay jointly and severally to: 1. Complainant Arturo E. Balbastro the sum of P369,303.09, with interest thereon at the legal rate from March 3, 1990 the date when respondents received the formal demand dated February 24, 1990 (Exhibits "C","C-1" and "C-2") until fully paid; and 2. Complainants the sum of P20,000.00 as attorney's fee and expenses of litigation, plus the cost of this suit. cdll SO ORDERED. (SGD.) ROLANDO C. MALABONGA Hearing Officer