Amlac Development Corp. v. Lacsa

[SEC-SICD * CASE NO. 4258. October 27, 1998.] AMLAC DEVELOPMENT CORP. , petitioner , vs . PEDRO LACSA ET AL. , respondents . D E C I S I O N This is an action for recovery and delivery of corporate documents and effects with damages, unauthorized maintenance of a branch office, and accounting of collections, with prayer for a, Temporary Restraining Order and Preliminary Prohibitory and Mandatory Injunction. The documents and effects sought to be recovered are the following: 1. Nine Transfer Certificates of Titles Nos. 335708, 335709, 335710, 335711, 335718, 335722, 335853, 335770, and 335774, issued in the name of the petitioner by the Register of Deeds for Quezon City (Exhs. "W" "W-1" to "W-8", respectively); 2. Stock and Transfer Book, books of accounts, financial statements for 1986-1990 and income tax return from 1986 to the present; 3. Three (3) Bank of the Philippine Islands checks signed in blank by Dr. Clemente Coloma; 4. Paid Vouchers, returned (uncashed) checks, bank and statement and deposit slips of petitioners account with Traders Royal Bank; 5. Used and unused Official Receipts; 6. Contract Agreement with Zamora Realty Development Corporation and other documents pertaining thereto; 7. Corporate Seal, stationeries and envelopes; 8. Bank Certificate of Stock; 9. Other corporate records and documents properly pertaining to the petitioner's corporate secretary, treasurer, or president. The petitioner sent demand letters for the delivery and turnover of the above-documents and effects (Exhibits "D", "F", "G"& "H") to no avail. The owner's duplicate certificates of the nine (9) TCT's, by Judicial Admission are in the possession of the respondent partnership (pars. 19 and 20, Amended answer of respondent partnership; TSN, July 8, 1992 p. 20) and are being withheld on account of alleged unpaid obligations of the petitioner corporation to the respondent partnership for "Clerical, administrative and accounting work and advanced/incurred expenses" (pars. 19 and 20, Amended Answer; TSN February 27, 1994, pp. 22-25) The books of accounts, financial statements for 1986-1990, and income tax returns for 1986-1989, are by judicial admission, in the possession of the respondent partnership (TSN, July 8, 1992, p. 20). LLpr The three (3) Bank of the Philippine Islands checks signed in blank by Dr. Clemente Coloma are unaccounted for. The vouchers, bank statements and deposit slips of the petitioner's account with Traders Royal bank are unaccounted for. The used and unused Official receipts have been transmitted by the respondent partnership to the petitioner (TSN, July 8, 1992, p. 23). The Contract/Agreement with Zamora Realty Development Corporation and other documents pertaining thereto are unaccounted for. The petitioner's stationeries and envelopes are by judicial admission in the possession of the respondent partnership (TSN, July 8, 1992, p. 24). The corporate seal and certificate of stocks, according to the counsel for respondent Lacsa, are non-existent (TSN, July 8, 1992, p. 23). On the two (2) other causes of action, the respondents claim they have no unaccounted collection and that they did not maintain any unauthorized office for the petitioner corporation. In its Amended Petition dated July 9, 1992, the petitioner demands of the respondents to surrender and turn over the corporate documents and effects mentioned in paragraph 4 thereof, and payment of attorneys fee of P500.00 per appearance and litigation expenses of at least P1,000,000.00 representing unearned profits and impairment of goodwill and reputation, exemplary or corrective damages of at least P2,000,000.00 and the costs. In his Answer dated August 6, 1992, respondent Lacsa interposed counterclaims for moral damages of P1,000,000.00 attorneys fees of P250,000.00 and litigation expenses of P100,000.00. In its Amended Answer dated February 13, 1993, the respondent Partnership interposed counterclaim for moral damages of P1,000,000.00, attorney's fees of P250,000.00, litigation expenses of P250,000.00 and "such amount for various services and advances as may be proven during the trial," which the respondent partnership sought to prove to be in the total amount of P157,319.63 if its Exhibits "16" and "18" are to be given credence. This alleged unpaid account is the reason the respondent partnership, is holding on to the owner's duplicate certificates of the nine (9) TCTS of the petitioner corporation. On cross-examination and rebuttal the petitioner sought to prove that the petitioner corporation owes nothing to either respondent Lacsa or the respondent partnership and that on the contrary, it is the respondents who owe the petitioner the amount of P15,061.94 Exhibits "11" and "11-1-a", Offer of Rebuttal Evidence dated March 8, 1995). The respondents presented no sur-rebuttal evidence. With the judicial admission of respondents, as mentioned above, and the supervening changes in relations of the parties during the pendency of the cases since the filing of the original petitioner on June 2, the issues have been simplified. Of the corporate documents and effects mentioned in paragraph 4 of the Amended Petition the respondents have admitted being in possession of the following: a) The owner's duplicate certificates of the nine (9) TCT's; b) The books of account financial statements for 1986-1990, and income tax returns for 1986-1989; c) Stationeries and envelopes. The Stock and Transfer Book is in the custody of the Hearing Officer. The used and unused official receipts have been transmitted to the petitioners. The corporate seal and blank certificates of stock "never existed." Hence, the documents that remain unaccounted for are the following: a) Three (3) Bank of the Philippine Islands checks signed in blank by Dr. Clemente Calma; b) Paid vouchers, returned (encashed) checks, bank statements and deposits slips of the petitioner's account with Traders Royal Bank; c) Contract/Agreement with Zamora Realty Development Corporation other documents pertaining thereto; These and the documents admittedly in the possession of the respondents are now the object of the petitioner's claim for recovery and delivery. The issue of unlawful maintenance of a branch office in Manila has become moot and academic since the petitioner has established and continue to maintain its sole office at Matimyas corner Data Streets, Quezon City, Metro Manila. The application for preliminary injunction therefore, has become unnecessary. Hence, the following issues to be resolved are the following: 1. Whether or not the respondents have any legal right to withhold the petitioner's documents and effects that they admitted to be in their possession. Corollary thereto whether or not the petitioner corporation has any unpaid obligation to the respondent partnership or vice versa; 2. Whether or not the respondents have any liability for the other documents that remain unaccounted for; 3. Which party or parties is/are entitled to damages. On the first issue of whether the respondents have any legal right to withhold the petitioner's documents and effects, the answer is in the negative. And on the issue of whether petitioner corporation has any unpaid obligation to the respondents, the answer is likewise in the negative. The respondents have judicially confessed that the owner's duplicate certificates of the nine (9) Transfer Certificates of Title in the name of the petitioner corporation (Exhibits "W", "W-1", to "W-8") are in their possession, specifically in the office of the respondent partnership (paragraphs 19 and 20 Amended Answer of respondent partnership; TSN, July 8, 1992, p. 20) Reason for detaining said documents: the petitioner corporation allegedly has unpaid obligation to the respondent partnership (paragraphs 19 and 20, Amended Answer; TSN, February 27, 1994, pp. 22-25). Assuming, for the sake of argument that the petitioner corporation has any unpaid obligation to the respondent partnership, there is no law or any agreement that allows the latter to detain any property of the latter * in the absence of any established lien or encumbrance, or writ of attachment or garnishment, or levy in execution or the like. llcd As a matter of fact, respondent partnership judicially confessed through respondent Lacsa, its managing partner that TCTs are being held hostage to answer for money claims of the respondent partnership against the petitioner corporation (TSN, February 17, 1994, p. 22). The truth of the matter is that petitioner corporation owes nothing to the respondent partnership. In an attempt to misled this Commission into believing that the petitioner corporation owes some money to the respondent partnership, the latter offered in "evidence" statements of accounts which are spurious or bloated or in fact already paid, while failing to account for installments payments received from lot buyers of the petitioner corporation. This ploy was fully unmasked by the petitioner on cross-examination and rebuttal evidence. a) Exhibit "16" purports to be a statement of account for P130,000.00 computed, as follows: Professional fee for accounting, tax, clerical and administrative services rendered from January 1 to October 1991 P70,000.00 Services rendered for 1990 P84,000.00 Less: Partial payment May 7, 1991 24,000.00 60,000.00 P130,000.00 On cross-examination (TSN, Jan. 6, 1994, pp. 8-25) and in rebuttal, the following facts were revealed and established. For professional services and cost of painting of the petitioner's financial statements for 1988, the petitioner paid the respondent partnership P6,120.00 (Exh. "Z", Offer of Rebuttal Evidence dated March 8, 1995). For professional services in connection with the petitioner's financial for 1987, the petitioner paid the respondent partnership P12,000.00 (TSN, August 3, 1994, pp. 6-7). For professional services and costs of printing of the petitioner's financial statements for 1988, the petitioner paid the respondent partnership P18,210.00 (Exh. "AA", Offer of Rebuttal Evidence). For professional services and cost of printing of the petitioner's financial statements for 1989, the petitioner paid the respondent partnership P24,220.00 (Exhs. "BB", "BB-1 " and BB-2"). For professional services in. connection with the petitioner's financial statements and income tax return for 1990, the petitioner paid the respondent partnership P24,000.00 (Exhs. "CC" and "CC-1", 8/9/94). The reason for the increase in the professional fee from P6,000.00 in 1986 to P12,000.00 in 1987, P18,000.00 in 1988 and P24,000.00 in 1989 and 1990 was the increase in sales of petitioner's subdivision lots (TSN, August 9, 1989 (Ibid, p. 12) In 1990 and 1991, there were no more sales which resumed only in 1992 (Ibid., pp. 12-13). Comes now the respondent partnership with its bloated and preposterous bill of P70,000.00 for 1991 for rendering services for less than a year (January-October) and admittedly preparing and filing any financial statements for the petitioner in that year unlike in the previous years (TSN, January 6, 1994, pp. 18-19). This amount of P70,000.00, billed for the year 1991 when there were no sales, is nearly three times (291.66%) more than the fee of P26,000.00 paid for 1989 when sales were at their peak. b) Exhibit 17, purports to be a statement of account for P84,000.00 (also included in Exhibit "16" allegedly for professional, clerical and administrative services in 1990. Like the bill for 1991, the claim for P84,000.00 is bloated and preposterous as it also pertains to a year when there were no sales and is three and a half times (350%) more than the fee for 1989, which was a peak year in sales. And what is more anomalous and oppressive, such absurdly exorbitant amount is being claimed for a year when the auditing services which the respondent partnership was supposed to render were in fact performed by another auditing firm, Ciedo Ciedo and Co. for which the petitioner corporation had to pay a separate fee. This was judicially admitted by respondent Lacsa himself (TSN, January 6, 1994, pp. 17-18). prcd In other words, for less services, the respondent partnership is billing more! Exhibits "16" and "17", Apparently are midnight fabrications of the respondent partnership to milk the petitioner. Exhibit "16" is dated December 31, 1991, after respondent Lacsa ceased to be President of the petitioner corporation and after the respondent partnership ceased to be the auditing firm of the petitioner corporation. Exhibit "17" is obviously an ante-dated document to support Exhibit "16". Both documents were prepared in the office of the respondent partnership and never left that office because it was also the office of the petitioner corporation, on (TSN, January 6, 1994, pp. 32-34) Neither document bears any date of receipt. No subsequent demand was ever made on the officers of the corporation after respondent Lacsa was removed as President and after the petitioner corporation left the office of the respondent partnership. It is obvious that the respondent partnership simply wants to present unreliable Exhibits "16" and "17" to justify withholding the corporate documents of the petitioner, particularly the nine TCTs, as an act of vindictiveness and harassments. c) Exhibit "18" is a statement of account purporting to show petitioner owes the respondent partnership the additional amount of P27,319.00. Exhibits "19" to "37" purport to be in support thereof. The problem with Exhibit "18" is that the "charges'' are overstated and the credits are understated. c.1. Under "charges" of Exhibit "18" the withholding taxes on corporation and or rentals per BIR Form No. 1743W attached" amounting to P6,106.24 is overstated because it includes taxes on compensation of respondent Lacsa from August to October 1991 amounting to P3,898.98 at P1,299.66 per month (Exhs. "29", "29-A" and "30"), when Lacsa was no longer president of the petitioner corporation at that time. He was replaced as such on August 3, 1991 (Exhs. "C" and "I") c.2 Also under "charges" of Exhibit "18" the "salaries and allowances net of withholding tax included above, of P.S. Lacsa" amounting to P26,101.02 should be excluded because they pertain to August-October 1991 when Lacsa was no longer President of the petitioner corporation Even assuming for the sake of argument, that Lacsa was president of the petitioner corporation up to October 1991 as he claims, his salaries and allowances are personal to him and cannot be legitimate claims of the respondent partnership against .the petitioner corporation. prcd c.3) Now, under "credits" of Exhibit "18", the respondent partnership failed to account for monies collected from installment lot buyers of the petitioner, reporting "balance collection" from Milagros Pea and Antonio Panelo amounting to only P2,437.72. As proved during rebuttal the respondent partnership actually received the following payments from the following lot buyers Milagros Pena P13,884.30 (OR 2479, 8/23/91) Antonio C. Panelo 1,113.95 (OR 2462, 7/16/91) Antonio C. Panelo 1,120.00 (OR 2478, 8/19/91) Antonio C. Panelo 1,120.00 (OR 2481, 9/16/91) Antonio C. Panelo 1,120.00 (OR 2490, 10/17/91) Antonio C. Panelo 1,120.00 (OR 2493, 11/16/91) Cecilia Afuang 6,191.75 (5 postdated checks at P1,238.35 for August to December 1991) Imelda Martin 4,140.90 (3 postdated checks at P1,380.30 for October to December 1991) These are itemized in Exhibit "II-1". With the foregoing corrections and revisions of the "charges" and "credits" in respondent partnership's Exhibit "18" , it appears that the excess of credits over charges is P15,061.91 (Exh. "11-1-a") which proves that instead of the petitioner corporation having any unpaid obligation to the respondent partnership, it is the latter that owes the former. cdll No sur-rebuttal evidence was ever presented to controvert this. Thus, the respondent partnership does not even have anything to warrant its continuous holding of the petitioner corporation by the unlawful and oppressive detention of the latter's corporate documents and effects. As stated earlier, even if the petitioner corporation had any unpaid obligation to the respondent partnership, the latter still has no right to detain any property of the former in the absence of any agreement to that effect, or any established lien or encumbrance, or Writ of Attachment or garnishment, or levy in execution, or the like. As mentioned herein below, the documents and effects belonging to the petitioner corporation that remain unaccounted for are: a) Three (3) Bank of the Philippine Islands checks signed in blank by Dr. Clemente Calma. b) Paid vouchers, returned (encashed) checks, bank statement, and deposit ships ( sic ) of the petitioner's account with Traders Royal Bank. llcd c) Contract/Agreement with Zamora Realty Development Corporation and other documents pertaining thereto. Demand for delivery of the above documents among others was duly made in writing by the petitioner on the respondents on August 14, 1991 (Exh. "D") and reiterated on August 29, 1991 (Exh. "F"), December 2, 1991 (Exh. "G" and May 2, 1992 (Exh. "H"). Respondent Lacsa acknowledged being in possession of documents (Exh. "E"). The keeping of the documents in the office of respondent partnership of which Lacsa is the managing partner is beyond dispute. The records are replete with repeated assertions by Lacsa that the petitioner corporation had no office of its Own, that all its transactions were conducted, its affairs administered and its documents kept at the office of respondent partnership. In other words, respondent partnership ran the entire operations of the petitioner. After the parting of ways between the petitioner and the respondents no receipt or other evidence was presented to show that the respondents returned the documents to the petitioner. Ergo, respondents are in disputably responsible for them. LLpr From the foregoing exposition, it is crystal clear that for their unlawful, oppressive and injurious acts and omissions, the respondents are solidarily liable for damages to the petitioner, as prayed for in the Amended Petition namely: a) Attorney's fees of P 50,000.00, per appearance, and litigation expenses of at least P 15,000.00; b) Actual and compensatory damages of at least P 1,000,000.00 representing unearned profits and impairment of the petitioner's goodwill and reputation; c) Exemplary and corrective damages of at least P 2,000,000.00; d) The cost. The petitioner has amply proved such damages. a) Exhibit "Y-1" contains the terms of engagement of the legal counsel for the petitioner. In compliance therewith, the petitioner has actually paid the following amounts as of June 4, 1993: prcd Exhs. "Y-1" and "Y-1-Q" downpayment of Attorney's fees P 10,000.00 Exhs "Y-2" and "Y-2-Q", appearance fees and expenses P 3,418.00 Exhs."Y-3" and "Y-3-Q" (part attributed to this case P 1,511.10 Exhs. Y-4" and "Y-4-Q" appearance fees and expenses P 713.00 Exhs. "Y-5" and "Y-5-Q" appearance fees and expenses P 1,021.75 Exh. "Y-6", filing fees and initial expenses P 3,811.65 Exh. "Y-7" and "Y-7-Q" Attorney's fee, appearance fees and expenses P 12,425.50 _________ P32,902.00 Not included in the above payments are the balance of the attorney's fee, additional appearance fees, and additional expenses that accrued after June 4, 1993 and were paid by the petitioner in accordance with the retainer terms (Exh. "Y") totalling in the amounts prayed for in the Amended Petition By reason of the respondents' unlawful detention of the nine TCTs, the petitioner was and is unable to collect the balances of the purchase price of the lots sold which are covered by the TCTS, because the lot buyers will not pay such balances without the corresponding deeds of absolute sale and delivery of the corresponding TCT's (TSN, May 10, 1993, pp. 5-6) thereby causing material damage to the petitioner in the form of unrealized earnings from sales of its subdivision lots and impairment of its business goodwill and reputation. To discourage and deter other persons who may be similarly tempted or inclined to take the law into their own hands by resorting to the extortionate blackmail of detaining and hostaging the property of supposed debtors the respondents should be sentenced solidarily to pay damages by way of example or correction for the public good This penalty is particularly applicable to the despicable conduct of respondent Pedro S. Lacsa who came into possession of the TCTs in his dual capacity as director and President of the petitioner corporation, as well as managing partner of the respondent partnership. In such dual capacity, he came into a clear conflict of interest in which he sacrificed the petitioner in favor of the respondent, partnership. In such dual capacity, he came into a clear conflict of interest in which he sacrificed the petitioner in favor of the respondent partnership. He should have borne in mind that: LLpr "A director is a fiduciary . . . He who is in such fiduciary position against serve himself first and his cestuis second . . . He cannot manipulate the affairs of his corporation to their detriment and in disregard of the standard of common decency He cannot by the intervention of a corporate entity violate the ancient precept against serving two masters . . . He cannot utilize his inside information and strategic position for his own preferment. He cannot violate rules of fair play by doing indirectly through the corporation what he could not do directly. He cannot use his power for his personal advantage and to the detriment of the stockholders and creditors no matter how absolute in terms that power may be and no matter how meticulous he is to satisfy technical requirements. For that power is at all may not be exercised for the aggrandizement, preference or advantage of the fiduciary to the exclusion or detriment of the cestuis" (Gokongwei, Jr. vs. Securities and Exchange Commission, G.R. No. L-45911, April 11, 1979, Citing Pepper Vs. Litton 308 VS 309, 84 L. ed. 281, 289-2911) WHEREFORE, premises considered, judgment is hereby rendered, as follows: 1. Declaring unjustified, unlawful and illegal respondents withholding of the owner's duplicate certificate of Title Nos. 335708, 335709, 335710, 335711, 335718, 335722, 335853, 335770 and 335774 of the Registry of Deeds of Quezon City, and ordering the respondents to surrender and deliver them to the petitioner; 2. Ordering the respondents to account for and deliver to the petitioner the three (3) Bank of the Philippine Islands checks signed in blank by Dr. Clemente Calma; paid vouchers, returned (encashed) checks bank statements, and deposited slips of the petitioner's account with Traders Royal Bank; and the Contract/Agreement with Zamora Realty Development Corporation and other documents pertaining thereto; 3. Sentencing the respondent solidarily to pay the petitioner the amounts of a) P15,061.91 representing the excess of credits over charges as computed in Exhibits "11-1", and "11-1-a"; b) Attorney's fees of P50,000.00, appearance fees of P11,000.00 for 22, appearances (verified from the records) and P15,000.00 as litigation expenses; c) Actual and compensatory damages of P20,000.00 representing unearned profits and impairment of petitioner' goodwill and reputation; and 4. Exemplary or Corrective Damages of P20,000.00. SO ORDERED. (SGD.) JUANITO B. ALMOSA JR. Hearing Officer