Cuenca v. Marañon

[SEC-SICD * CASE NO. 11-97-5822. December 21, 1998.] TOMAS C. CUENCA , petitioner , vs .MANUEL D. MARAON , respondent . [SEC-SICD * CASE NO. 02-98-5894. December 21, 1998.] MARCELINA V. CUENCA, MILAGROS V. CUENCA, FIDES M. CUENCA and TERESA C PAREDES , petitioners , vs .MANUEL MARAON, ANGELA C. MARTINEZ and ARC CUISINE INC. , respondents . D E C I S I O N Filed before this Commission are two petitions; one filed by petitioner Tomas C. Cuenca docketed as SEC No. 11-97-5822 and another one filed by Tomas Cuenca and joined by three (3) others docketed as SEC Case No. 02-18-5894. Since both cases are now consolidated before the undersigned Hearing Officer and considering that both involve the same parties and the same corporation, with the prayers interrelated to each other, we deemed it right and proper that the merits of the cases be jointly passed upon. On SEC Case No. 11-97-5822: Petitioner and respondent are stockholders of ARC Cuisine Inc.,a domestic corporation engaged in the restaurant business. At all times material to this action, petitioner was the Chairman while respondent was the President. It was alleged in the petition that at the meeting of the stockholders held on July 22, 1997, the parties herein were given the joint authority relative to the operation of the business of the Corporation. Respondent in many instances allegedly violated said resolution. It was likewise alleged by petitioner that respondent put up his own catering business named "FOOD CIRCLE",in direct competition with that of the restaurant business of the corporation. Furthermore, respondent allegedly used the telephone number and E-Mail Address of the company restaurant in his own catering business. On December 01, 1997, respondent filed his answer with counterclaim with prayer for the issuance of a Temporary Restraining Order (TRO).He alleged therein that he invested P5 Million in the corporate business and it would be illogical for him to close down the corporation. Respondent denied the allegations in the petition and for his part alleged that it was petitioner who wanted to "Lord" it over the corporation and that petitioner's daughter Marcelina Cuenca made it appear that the corporation was indebted to her when in fact it was not. As regards the catering business which was allegedly in direct competition with that of the restaurant operated by the corporation; respondent at first denied the same and then admitted that the catering business is a small one with select clients and is run by his wife. He alleged that the same is not in direct competition with the business of the corporation. Respondent averred that petitioner was juggling corporate funds. In support thereof, he presented vouchers showing liquidation of cash advances made by the restaurant manager Elizabeth de la Cruz. The said vouchers however, failed to prove the allegation with respect to the juggling of funds. At best, it would show that those expenses were incurred in relation to the operation of the restaurant for the period. On December 15, 1997, this Commission issued an Order directing the parties to submit their respective memoranda in support of their prayer for the issuance of a Temporary Restraining Order. The parties, in their respective memoranda reiterated and amplified their averments. In his reply memorandum, petitioner among others manifested that respondent had paid the separation pay of the employees and has actually closed down the business. Respondents did not deny the manifestation that the restaurant owned by the corporation had been closed. In view of said intervening event, the prayer for a temporary restraining order has been rendered moot and academic as the alleged acts sought to be enjoined by both parties can no longer be carried out or continued considering that there was no more restaurant to manage. SEC CASE NO. 02-98-5894: On February 12, 1998, a case was filed by Marcelina V. Cuenca, Milagros V. Cuenca, Teresa C. Paredes and Fides M. Cuenca against herein respondent together with Angela Martinez and the corporation, ARC Cuisine Inc.,docketed as SEC Case No. 02-98-5894 filed by four (4) stockholders against two (2) other remaining stockholders and the corporation seeking reliefs, namely; accounting/auditing of corporate assets; collating of a delivery vehicle into the corporate assets; damages; liquidation; appointment of liquidating receivers; and payment of corporate liabilities. Petitioners Marcelina V. Cuenca, Milagros V. Cuenca, Fides M. Cuenca and Teresa C. Paredes are stockholders of respondent corporation, Arc Cuisine Inc. while individual respondents Manuel Maraon and Angela C. Martinez are likewise stockholders of respondent corporation. In their petition filed before this Commission on February 08, 1998, petitioners alleged that Marcelina V. Cuenca was the duly elected Vice President of respondent Corporation and respondent Manuel Maraon was subsequently elected President. It was alleged that intra-corporate controversy started when respondent Maraon ignored the stockholders instructions that corporate decisions and management be carried out by both respondent Maraon and the Chairman, Tomas Cuenca. Petitioners cited several incidents that proved that respondent Maraon unilaterally carried out his own decisions to the detriment of the corporation. It was alleged in the petition that he reinstated an employee against the objection of the Chairman, issues memorandum with arrogant tenor to the Chairman and totally ignored him and excluded him in decision making. It was further alleged that respondent Maraon ordered long-established suppliers to stop supplying goods to the Corporation, thus causing stoppage of company operations. Worse, respondent Maraon ordered the closure of Corporate offices/commissary located at 844 Turin Street. BF Homes, Paraaque. The petition went on to cite the alleged misdeeds of respondent Maraon such as refusing to sign checks causing disruption in company operations. Meanwhile, he put his own catering business in direct competition with that of the corporate business. He eventually closed the restaurant owned and operated by respondent corporation. Petitioner questioned not only the reason for the closure but more so, the timing which was on December 08, 1997, a peak season for any restaurant business. Individual respondents, according to petitioners conspired and confederated to surrender the L-300 delivery van of respondent company to the mortgagee bank without Board approval. Still, another cause of action raised by petitioners was the unceremonious removal of Milagros V. Cuenca as Director of respondent Corporation. It was alleged that he even maligned and caused shame and indignity upon the person of petitioner Milagros V. Cuenca. On March 05, 1998, respondents filed their Answer/Counterclaim with Motion to Dismiss. It was manifested therein that they reincorporate the allegations submitted in Case No. 11-97-5822. It is alleged that the instant petition is a mere rehash and a repetition of the earlier case which was filed by Tomas Cuenca against Maraon on November 23, 1997. Respondents alleged that Maraon filed a criminal complaint for Estafa against Tomas Cuenca, Marcelina Cuenca and Milagros Cuenca with the City Prosecutor of Paraaque sometime in January, 1998 and a civil action for alleged damages against the said parties. Respondents did not offer any controverting evidence against petitioners but merely alleged that they (petitioners) are guilty of forum-shopping and prayed for the dismissal of the instant petition. On April 13, 1998, petitioners filed their Reply and alleged therein that it was respondent Maraon who committed forum shopping when he filed a criminal complaint for estafa after he was made respondent in the earlier case filed before this Commission by Tomas Cuenca and the civil case for alleged damages which may have been filed earlier but was only received by petitioners herein after they have filed the instant petition. Petitioners objected to the re-pleading in SEC CASE NO. 11-97-5822 on the ground that it was improper specially since there was no consolidation of the case and that they must set forth the substance of their defense in their answer to the petition and not to the earlier case. In their reply, petitioners manifested that all the assets of respondent corporation were attached by respondent Maraon by virtue of a writ of preliminary attachment which he secured in the Civil Case he filed with the Regional Trial Court Branch 259, Paraaque. To date however, the said writ was not implemented as the RTC judge handling the case was restrained/enjoined by the Court of Appeals when the case was elevated by the petitioners herein. (Ex-parte Manifestation, Nov. 03, 1998) Petitioners maintain that respondents failed to tender an issue in their Answer/counterclaim with Motion to Dismiss. Upon respondent Maraon's motion that the parties be allowed to submit their respective Memorandum instead of trial on the merits and petitioners agreeing thereto for the reason that the issues have all been sufficiently and clearly ventilated in their respective pleadings, the Commission set the submission of the Memorandum to 19 June 1998 or thirty (30) days after the oral motion made by respondent Maraon through counsel. On June 18, 1998, petitioners filed their Memorandum. Respondents, on the other hand requested for an extension of ten (10) days to file the same which was favorably granted by this Hearing Officer. Despite the extension, respondents still failed to submit the said Memorandum, thus the Order of this Hearing Officer declaring respondents to have waived their right to submit the said Memorandum and that the case be now deemed submitted for resolution taking into consideration all the pleadings and evidence so far submitted. (Order dated October 28, 1998.) From the evidence submitted by the petitioners and from the answer filed by respondents, this Commission finds for the petitioners. Respondents' obvious failure to present countervailing evidence and at the very least deny the allegations in the petition serve to lend credence to petitioners' assertions that respondent Maraon did in fact committed the acts complained of. Respondent Maraon was a corporate officer being the president and as such, he occupies a fiduciary relations with the Corporation and the stockholders. His position is that of trusteeship and he is under obligation to exercise not only care and diligence but utmost good faith in the management of corporate affairs. His decision to re-hire an employee over the objections of the Chairman, refused to sign checks despite the obvious consequence of disruption of day to day company operations; ordering suppliers to stop supplying goods to the company (Exhibits "B" to "F") inclusive and refusing to pay the amortization of a corporate vehicle and surrendering the same to the mortgagee bank without the knowledge and consent of other stockholders/Directors, point to the fact that he failed to act fairly in the interest of the corporation. Further, in opening a catering business for himself, in direct competition with that of the very same business of respondent Corporation, such act by respondent Maraon is not without taint of selfish motives and against the interest of the Corporation (See Legarda in La Previsora, G.R. No. 44451, December 16, 1938, 66 Phils. 723; SEC Opinion dated March 14, 1989, The SEC Quarterly Bulletin, Vol. XIII, No. 2 June 1989, pp. 8-11); and Ponce vs. Legaspi, G.R. No. 79184, May 6, 1992, 208 SCRA 337). The act of removing petitioner Milagros V. Cuenca as Director is in violation of the provisions of the Corporation Code, specially Sec. 28 thereof. Thus, petitioner Milagros V. Cuenca's removal as Director (Exh. "A") being patently illegal, is hereby deemed null and void and for all intents and purposes, she remains a Director of respondent corporation at all times contemplated in this action. It is not difficult to find malice, ill-will and selfish motive in respondent Maraon's unilateral decision to close the restaurant, respondent company's major source of revenue, specially during the Christmas season, the period when business of such nature is at its peak. For such act, he should be held civilly liable. Sec. 31 of the Corporation Code provides that: "SECTION 31. Liability of Director, trustees or officers . Directors or trustees who willfully or knowingly vote for or assent to patently unlawful acts of the corporation 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." Petitioners pray that respondent corporation be ordered to resume payments of its duly acknowledged liability to Marcelina Cuenca in the amount of U.S. $6,015.54 as evidenced by the memo dated July 22, 1997 (Exh. "H").It appearing that said claim is meritorious, this Commission finds for petitioner Milagros Cuenca. Petitioners likewise prayed that respondents specially Maraon be held liable for actual damages in the amount of P800,000.00 constituting unrealized profit due to the untimely and continued closure of the restaurant business owned by respondent corporation. Petitioners, however failed to present a detailed basis for the amount prayed for. The prayer for the appointment of liquidating trustee is found to be meritorious considering the fact that the corporate assets are likely to deteriorate from non-use and corporate obligations to creditors have to be settled. It appearing that petitioner Marcelina V. Cuenca was most actively involved in running the restaurant business of the corporation, she is deemed most qualified to oversee the liquidation of the same corporation. WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows: 1) Respondent Maraon is hereby declared to have abandoned his position as President of ARC Cuisine Inc.,effective upon the closure of the business on December 08, 1997; 2) Respondent Maraon is hereby held liable to: a) respondent corporation in the amount to be determined after an accounting has been conducted, constituting unrealized profits of the corporation due to his refusal to pay suppliers and his unauthorized instructions to suppliers to stop delivering goods to the respondent corporation, causing serious disruption in the restaurant operations; and his untimely, unauthorized and continued closure of the restaurant; b) petitioners for moral damages in the amount of P20,000.00; 3) Respondent Maraon and Martinez to collate the value of the L-300 van and any and all corporate assets in their possession, into the assets of ARC Cuisine Inc.; 4.) Respondent ARC Cuisine Inc. to engage the services of a reputable independent auditor to conduct financial audit of the corporation; 5) A Liquidating Trustee is hereby appointed in the person of petitioner Marcelina V. Cuenca who shall oversee the liquidation of the company and shall be accountable to this Commission and shall comply with all the statutory requirements for the liquidation of the corporation. 6.) Respondent Maraon to pay Attorney's Fees in the amount of P20,000.00 SO ORDERED. (SGD.) JULIETO F. FABRERO Hearing Officer