The MR International Corp. v. Noceda

[SEC-SICD * CASE NO. 4282. October 11, 1994.] THE MR INTERNATIONAL CORP., ET AL. , petitioners , vs . MARIBEL S. NOCEDA , respondent . MA. ADELA B. LLEVA, ET AL. , intervenors, DEBORAH G. IMPERIAL, ET AL. , intervenors . D E C I S I O N This has reference to the petition filed by The MR International, et al., against Maribel Noceda, as incorporator and director of the petitioner corporation, alleging, among others, that the former was duly incorporated, organized and existing under Philippine laws on June 27, 1991 with the primary purpose of operating and maintaining theater lounges, music rooms and opera houses, among others; that at present, the corporation owns and operates the "Moulin Rouge Theater Lounge" located at the 2nd and 3rd floors, U.N. Plaza Building, 500 U.N. Avenue corner A. Mabini Street, Ermita, Manila; that individual petitioners namely: Tetsuya Inoue, Elizabeth Castaeda, Benigno Sablan and Imelda Mateo and respondent Maribel S. Noceda are the incorporators and the incorporating directors of the MR International Corporation; that individual petitioners collectively own sixty (60%) percent of the outstanding capital stock in the corporation; that notwithstanding the majority ownership of stock of the petitioners in the corporation; they were unlawfully and fraudulently excluded from the management and direction of the affairs of petitioner corporation by respondent; that since the incorporation of the Mr. International Corporation and up to the present, respondent Noceda has been grossly and fraudulently mismanaging the business affairs and assets of the corporation, including the "Moulin Rouge Theater Lounge" as if it were her exclusive property in gross and wanton breach of her fiduciary duties to the corporation and its stockholders; that she has likewise usurped and arrogated upon herself the power of the Board of Directors without any prior authority that since its incorporation and up to the present, the management of Mr. International, including that of the "Moulin Rouge Theater Lounge" has been entirely in the hands of respondent, to the exclusion of the individual petitioners; that no actual meetings of the Board of Directors were held despite the fact that the directors are required to meet regularly at least once every quarter of the year, nor was there any meeting of the stockholders held on the 3rd Friday of December as required under the by-laws of the corporation; that respondent Noceda has also been fraudulently using corporate assets, including the revenues from the operation of the "Moulin Rouge Theater Lounge" and has been manipulating corporate affairs for her personal gain and benefit and without authority of the Board of Directors; that respondent likewise is disbursing corporate funds and incurring liabilities for purposes which have not redounded to the benefit of the corporation but to her personal benefit and gain and such acts have placed the corporation in serious danger and in the brink of financial distress; that despite several demands from petitioners, respondent never rendered an accounting of her administration of the "Moulin Rouge Theater Lounge" and other assets and funds of the corporation to the Board of Directors and to the stockholders and neither did she issue certificates of stock to the individual petitioner who have fully paid their subscriptions; that petitioners have been physically barred from entering the premises of the "Moulin Rouge Theater Lounge"; that notwithstanding petitioners' repeated demands and efforts, respondent failed and refused and continuously fails and refuses, to desist from committing further acts of mismanagement to the damage and prejudice of the petitioners and the corporation; that as a result of respondent's above described mismanagement and fraudulent acts, the business, funds and assets of the corporation, including the revenues from the operation of the "Moulin Rouge Theater Lounge" have been continuously dissipated to the detriment of the corporation and of the stockholders who have been deprived of their just shares in the profits of the corporation; and that individual petitioners have exhausted all intra-corporate remedies which have proven to be ineffectual against the virtual complete hold and control of respondent over the affairs of the corporation and of the "Moulin Rouge Theater Lounge". LLjur In answer thereto with opposition to the petitioners' application for the issuance of the writ of preliminary injunction, and appointment of an interim receiver, respondent categorically denied the material allegations of the petition more particularly on the personal capacities of petitioner Tetsuya Inoue, Elizabeth Castaeda and Benigno O. Sablan as stockholders in instituting this action as they are no longer stockholders of the corporation at the time of the filing of this case; that Tetsuya Inoue had already assigned all his shares in the corporation in favor of respondent Noceda, Imelda Mateo, Adela B. Lleva, Gina Lleva and Noemi Aguilar (Deeds of Assignments executed by Tetsuya Inoue all dated November 21, 1992); that petitioner Castaeda assigned her shares in favor of Noceda on November 24, 1991 and petitioner Sablan assigned his share in favor of Noceda on June 30, 1992; that respondent denied that she mismanaged the business affairs of the corporation or committed any fraudulent acts in managing the affairs of the corporation; that the fact is that she has been diligently managing the business affairs and assets of the corporation by employing and engaging the services of qualified personnel and professionals to see to it that the corporation is complying with all laws, rules and regulations applicable to the business affairs of the corporation and to the extent of making personal advances of funds to the corporation; that respondent registered her opposition to the issuance of the preliminary injunction on the grounds that petitioners Inoue, Sablan and Castaeda have no cause of action against the respondent as they are no longer stockholders, directors or officers of the corporation; that petitioner Mateo is not entitled to the relief prayed for as respondent has not mismanaged nor committed any fraudulent acts in managing the affairs of the corporation, and no injustice or irreparable injury will be suffered by individual petitioners as the business of the corporation is well managed by the respondent; that neither are they entitled to an interim receiver for the simple reason that all individual petitioners, except Imelda Mateo, have no more direct and material interest in the properties of the corporation as they are no longer stockholders of the corporation; and that the properties and assets of the corporation are not in grave or imminent danger, of being lost, destroyed or dissipated as all the properties, assets and business affairs of the corporation are well managed by the respondent. By a Motion For Intervention dated August 7, 1992, Ma. Adela B. Lleva and Juliel I. Bautista were allowed to intervene, and on August 18, 1992, they filed an Answer in Intervention alleging, among others, that intervenors are stockholders/shareholders of the MR International Corporation and each of them is holding two hundred (200) common shares; that intervenor Ma. Adela Lleva acquired her shares from Tetsuya Inoue by way of assignment; that intervenor Gina Lleva acquired also her shares from Tetsuya Inoue by way of assignment and intervenor Julie Bautista has acquired her shares from Noemi L. Aguilar by way of assignment; that by way of opposition to petitioners' application for a writ of preliminary injunction and appointment of interim receiver, intervenors hereby reproduce, replead, incorporate by way of reference and adopt all the materials allegations of respondents' answer dated August 7, 1992; and that as a special defenses, they alleged that petitioners Elizabeth P. Castaeda, Tetsuya Inoue and Benigno Sablan are no longer stockholders and directors of MR International Corporation. Petitioners, by way of reply, specifically deny the allegations of the Answer in Intervention to the effect that petitioners Castaeda, Inoue and Sablan are no longer stockholders or directors of MR International Corporation; and that intervenors Adela Lleva, Gina Lleva and Juliet Bautista are not stockholders of the corporation, the truth being that the Deeds of Assignment are null and void for lack of consideration, as no money was ever paid by intervenors to the supposed assignors as consideration for the assignment; and that petitioners are adopting as part of their reply the allegations of their Supplemental Application For Writ of Preliminary Injunction dated August 11, 1992, and the allegations of their Reply and Answer to Counterclaim dated August 20, 1992. llcd Upon the foregoing aforestated facts, the issues clearly revolves on the following: 1. Whether petitioners Mateo and Castaeda are the true and beneficial owner of the shares of stock in the MR International Corporation recorded in the name of the respondent Noceda; 2. Whether the Deeds of Assignment submitted by respondent Noceda are valid or null and void; 3. Whether respondent Noceda mismanaged the asset and business of petitioner Mr. International Corporation; and 4. Whether petitioners are entitled to damages and attorney's fees. Proofs adduced by petitioners consist of the testimonies of Imelda Mateo, Elizabeth Castaeda and Benigno Sablan. Petitioners sought to establish that Mr. International is 60% Filipino and 40% foreign corporation; that of the P2 Million subscribed capital stock of the corporation, 40% or P800,000 were subscribed and fully paid by Tetsuya Inoue, a Japanese citizen and Benigno Sablan, a Saipanese citizen; and the asset and business of Moulin Rouge Theater Lounge were purchased by Mr. International from the previous owner for the amount of P8 Million; that out of the aforesaid P8 Million purchase price, the amount of P3,200,000 was jointly contributed by Messrs. Inoue and Sablan; while the balance of P4,800,000 was jointly contributed by Castaeda and Mateo; that Imelda Mateo borrowed her share of P2.4 Million from her fiance Tetsuya Inoue; and that respondent Noceda did not contribute a single centavo to the purchase price. On the otherhand respondent Noceda claimed that individual petitioners no longer owned any shares of stock in the corporation in view of the fact that they have executed various Deed of Assignment transferring their shares in favor of other persons. From the copy of the Deeds of Assignment which were presented in evidence during the hearing, it appears that there were really transfers of shares of petitioners to respondent Noceda herself. Likewise, it was shown that a consideration appears to have been paid to petitioners. However, the above-facts notwithstanding, we are still at a loss to conclude that there was really a transfer of shares. That respondent Noceda did really pay the considerations as stated in the Deeds of Assignments to herein petitioners are facts not supported by evidence on record. On the contrary, from the facts unraveled during the hearing particularly on this matter concerning the Deeds of Assignment, it was clearly shown that individual petitioners never effectively assigned their respective shares in the corporation. The Deeds of Assignment produced by respondent Noceda during the trial were all simulated and executed without any consideration whatsoever. Moreover, it was also further shown that the documents were notarized by the notaries public in the absence of the petitioners who were supposed to be the assignors. All these were indubitably established by the testimony of Benigno Sablan himself who even categorically testified that he did not receive any payment from Miss Noceda whether in pesos or in dollars. And it is worthy to note that the foregoing evidence were not rebutted by respondent Noceda. That respondent Maribel S. Noceda is guilty of mismanagement of the assets and business of Mr. International Corporation is borne out by the records. Since the incorporation of Mr. International, respondent Noceda has operated the corporation as if it were her own exclusive property with neither care nor regard for the rights of her co-stockholders. She was using the funds of the corporation any way it pleased her, since she was the only signatory to the corporation's bank accounts. She had no problem about accountability because the company's accountant, Linda Beltran was also its own internal auditor. She never called for the annual meeting of the stockholders. She never reported to the other stockholders or directors about what was going on in the corporation. Respondent never took step to issue certificates of stock to the stockholders who have fully paid up their subscription. By respondents' admission, the business has been incurring a daily loss of P5,000.00 or a monthly loss of P150,000.00 or a total of P1.8 Million in one year's operation. The result of one-person operation is a financial mess. The salaries of the employees were not being paid on time and even the payment of rental for the lease of the premises to Mr. Laurence Wung was delayed. Considering the financial status and the sorry state of the company's financial affairs, one would have expected that respondent Noceda would adopt belt-tightening measures, such as foregoing in the meantime her receiving of salaries. But respondent continued to draw her own salaries, oblivious of the company's business losses. There is no showing that she did anything to salvage the corporation from its financial setback. This to us is a clean case of mismanagement. Respondent's inaction is believed to be nothing but a convenient excuse for her to perpetrate her malevolent scheme of milking further the corporation of its corporated funds. WHEREFORE, judgment is hereby rendered as follows: 1. Making the Writ of Preliminary Injunction issued on October 12, 1992 permanent; 2. Ordering respondent Noceda to render a full and accurate accounting of her management and administration of the business affairs, funds and assets of the corporation during her incumbency; 3. Ordering respondent Noceda to restore to the corporation all corporate funds, which respondents had fraudulently transferred, misapplied and converted to her own use with legal interest; 4. Ordering the issuance of stock certificates to stockholders, including individual petitioners; 5. Ordering the payment to intervenor Seaside Enterprises Corporation, through Deborah G. Imperial, the rental in arrearages plus legal interest thereon; 6. Ordering respondent Noceda to pay petitioners attorney's fees in the amount of P150,000.00. prLL SO ORDERED. (SGD.) ALBERTO P. ATAS Hearing Officer