Mister Criminology

BUENAFLOR C. UMALI, MAURICIA M. VDA. DE CASTILLO, VICTORIA M. CASTILLO, BERTILLA C. RADA, MARIETTA C. ABAÑEZ, LEOVINA C. JALBUENA and SANTIAGO M. RIVERA vs. COURT OF APPEALS, BORMAHECO, INC. and PHILIPPINE MACHINERY PARTS MANUFACTURING CO., INC.

G.R. No. 89561 September 13, 1990

Facts:

1. Plaintiff Santiago Rivera is the nephew of plaintiff Mauricia Meer Vda. de Castillo.

2. The Castillo family are the owners of a parcel of lands which was given as security for a loan from the DBP.

3. For their failure to pay the amortization, foreclosure of the said property was about to be initiated.

4. This problem was made known to Rivera, who proposed to them the conversion into subdivision of the four parcels of land adjacent to the mortgaged property to raise the necessary fund.

5. The Idea was accepted by the Castillo family and to carry out the project, a Memorandum of Agreement was executed by and between Slobec Realty and Development, Inc., represented by its President Rivera and the Castillo family.

6. Rivera, armed with the agreement, approached Mr. Modesto Cervantes, President of defendant Bormaheco, and proposed to purchase from Bormaheco two tractors.

7. Slobec, through Rivera, executed in favor of Bormaheco a Chattel Mortgage over the said equipment as security

8. As further security of the aforementioned unpaid balance, Slobec obtained from Insurance Corporation of the Phil. a Surety Bond, with ICP (Insurance Corporation of the Phil.) as surety and Slobec as principal, in favor of Bormaheco.

9. The aforesaid surety bond was in turn secured by an Agreement of Counter-Guaranty with Real Estate Mortgage executed by Rivera as president of Slobec and Castillo family, as mortgagors and ICP as mortgagee.

10. In giving the bond, ICP required that the Castillos mortgage to them the four parcels of land.

11. For violation of the terms and conditions of the Counter-Guaranty Agreement, the properties of the Castillos were foreclosed by ICP - the highest bidder.

12. The mortgagors had one year to redeem the property, but they failed to do so.

13. Consequently, ICP consolidated its ownership.

14. ICP sold to PM Parts the four parcels of land.

15. Thereafter, PM Parts, through its President, Mr. Modesto Cervantes, sent a letter addressed to plaintiff Mrs. Mauricia Meer Castillo requesting her and her children to vacate the subject property.

16. The heirs of the late Felipe Castillo filed an action for annulment of title.

17. Judgment is hereby rendered in favor of the plaintiffs – agreements etc - null and void for being fictitious, spurious and without consideration.

Issue:

Whether or not there is necessity to pierce the veil of corporate entity of Bormaheco, ICP and PM Parts, to determine whether they employed fraud in causing the foreclosure and subsequent sale of the real properties belonging to petitioners

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Ruling:

It is our considered opinion that piercing the veil of corporate entity is not the proper remedy in order that the foreclosure proceeding may be declared a nullity under the circumstances obtaining in the legal case at bar.

In the first place, the legal corporate entity is disregarded only if it is sought to hold the officers and stockholder directly liable for a corporate debt or obligation. In the instant case, petitioners do not seek to impose a claim against the individual members of the three corporations involved; on the contrary, it is these corporations which desire to enforce an alleged right against petitioners. Assuming that petitioners were indeed defrauded by private respondents in the foreclosure of the mortgaged properties, this fact alone is not, under the circumstances, sufficient to justify the piercing of the corporate fiction, since petitioners do not intend to hold the officers and/or members of respondent corporations personally liable therefor. Petitioners are merely seeking the declaration of the nullity of the foreclosure sale, which relief may be obtained without having to disregard the aforesaid corporate fiction attaching to respondent corporations.

Secondly, petitioners failed to establish by clear and convincing evidence that private respondents were purposely formed and operated, and thereafter transacted with petitioners, with the sole intention of defrauding the latter.

The mere fact, therefore, that the businesses of two or more corporations are interrelated is not a justification for disregarding their separate personalities, absent sufficient showing that the corporate entity was purposely used as a shield to defraud creditors and third persons of their rights.

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FRANCISCO MOTORS CORPORATION vs. COURT OF APPEALS, G.R. No. 100812. June 25, 1999

FRANCISCO MOTORS CORPORATION vs. COURT OF APPEALS and SPOUSES GREGORIO and LIBRADA MANUEL

G.R. No. 100812. June 25, 1999

Facts:

1. Petitioner filed a complaint against respondents to recover P3,412.06, representing the balance of the jeep body purchased by the Manuels from petitioner.

2. Respondents interposed a counterclaim for unpaid legal services by Gregorio Manuel in the amount of P50,000 which was not paid by the incorporators, directors and officers of the petitioner.

3. The trial court decided the case in favor of petitioner in regard to the petitioners claim for money, but also allowed the counter-claim of private respondents.

4. Private respondent Gregorio Manuel, while he was petitioners Assistant Legal Officer, he represented members of the Francisco family in the intestate estate proceedings of the late Benita Trinidad.

5. However, even after the termination of the proceedings, his services were not paid.

6. Said family members, he said, were also incorporators, directors and officers of petitioner. And that is his basis in saying that the corporation is liable.

Issue:

Whether or not the corporation is liable to the unpaid legal services

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Ruling:

Given the facts and circumstances of this case, the doctrine of piercing the corporate veil has no relevant application here. The rationale behind piercing a corporation’s identity in a given case is to remove the barrier between the corporation from the persons comprising it to thwart the fraudulent and illegal schemes of those who use the corporate personality as a shield for undertaking certain proscribed activities. However, in the case at bar, instead of holding certain individuals or persons responsible for an alleged corporate act, the situation has been reversed. It is the petitioner as a corporation which is being ordered to answer for the personal liability of certain individual directors, officers and incorporators concerned. Hence, it appears to us that the doctrine has been turned upside down because of its erroneous invocation. Note that according to Gregorio Manuel his services were solicited as counsel for members of the Francisco family to represent them in the intestate proceedings over Benita Trinidads estate. These estate proceedings did not involve any business of petitioner.

His move to recover unpaid legal fees through a counterclaim against Francisco Motors Corporation, to offset the unpaid balance of the purchase and repair of a jeep body could only result from an obvious misapprehension that petitioner’s corporate assets could be used to answer for the liabilities of its individual directors, officers, and incorporators. Such result if permitted could easily prejudice the corporation, its own creditors, and even other stockholders; hence, clearly inequitous to petitioner.

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LUXURIA HOMES, INC., and/or AIDA M. POSADAS vs. HONORABLE COURT OF APPEALS, G.R. No. 125986 January 28, 1999

LUXURIA HOMES, INC., and/or AIDA M. POSADAS vs. HONORABLE COURT OF APPEALS, JAMES BUILDER CONSTRUCTION and/or JAIME T. BRAVO

G.R. No. 125986 January 28, 1999

Facts:

1. Posadas entered into negotiations with Bravo regarding the development of the 1.6 hectare property which was occupied by squatters, into a residential subdivision.

2. Some seven months later, Posadas, through a Deed of Assignment, assigned the said property to Luxuria Homes, Inc., purportedly for organizational and tax avoidance purposes.

3. Respondent Bravo signed as one of the witnesses to the execution of the Deed of Assignment and the Articles of Incorporation of Luxuria Homes, Inc.

4. The relationship of Posadas and Bravo turned sour when the former supposedly could not accept the management contracts to develop the property into a residential subdivision, the latter was proposing.

5. In retaliation, Bravo demanded payment for services rendered in connection with the development of the land.

6. Posadas refused to pay the amount demanded.

7. Thus James Builder Construction and Bravo instituted a complaint for specific performance against Posadas and Luxuria Homes, Inc.

Issue:

Can petitioner Luxuria Homes, Inc., be held liable?

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Ruling:

Private respondents contend that petitioner Posadas surreptitiously formed Luxuria Homes, Inc., and transferred the subject parcel of land to it to evade payment and defraud creditors, including private respondents.

The Deed of Assignment and the Articles of Incorporation of Luxuria Homes, Inc., were both signed by respondent Bravo himself as witness. It cannot be said then that the incorporation of petitioner Luxuria Homes and the eventual transfer of the subject property to it were in fraud of private respondents as such were done with the full knowledge of respondent Bravo himself.

Besides petitioner Posadas is not the majority stockholder of petitioner Luxuria Homes, Inc. The Articles of Incorporation of petitioner Luxuria Homes, Inc., clearly show that petitioner Posadas owns approximately 33% only of the capital stock. Hence petitioner Posadas cannot be considered as an alter ego of petitioner Luxuria Homes, Inc. To disregard the separate juridical personality of a corporation, the wrongdoing must be clearly and convincingly established. It cannot be presumed.

Since private respondents failed to show that petitioner Luxuria Homes, Inc., was a party to any of the supposed transactions, not even to the agreement to negotiate with and relocate the squatters, it cannot be held liable, nay jointly and in solidum, to pay private respondents. In this case since it was petitioner Aida M. Posadas who contracted respondent Bravo to render the subject services, only she is liable to pay the amounts adjudged herein.

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ADELIO C. CRUZ vs. QUITERIO L. DALISAY, Adm. Matter No. R-181-P July 31, 1987

ADELIO C. CRUZ vs. QUITERIO L. DALISAY

Adm. Matter No. R-181-P July 31, 1987

Facts:

1. Respondent sheriff attached and/or levied the money belonging to complainant Cruz when he was not himself the judgment debtor in the final judgment of NLRC Case sought to be enforced but rather the company known as "Qualitrans Limousine Service, Inc.," a duly registered corporation.

2. Respondent Dalisay explained that when he garnished complainant's cash deposit at the Philtrust bank, he was merely performing a ministerial duty. While it is true that said writ was addressed to Qualitrans Limousine Service, Inc., yet it is also a fact that complainant had executed an affidavit before the Pasay City assistant fiscal stating that he is the owner/president of said corporation and, because of that declaration, the counsel for the plaintiff in the labor case advised him to serve notice of garnishment on the Philtrust bank.

Issue:

Whether or not the act of Dalisay is justified

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Ruling:

The tenor of the NLRC judgment and the implementing writ is clear enough. It directed Qualitrans Limousine Service, Inc. to reinstate the discharged employees and pay them full backwages. Respondent, however, chose to "pierce the veil of corporate entity" usurping a power belonging to the court and assumed improvidently that since the complainant is the owner/president of Qualitrans Limousine Service, Inc., they are one and the same. It is a well settled doctrine both in law and in equity that as a legal entity, a corporation has a personality distinct and separate from its individual stockholders or members. The mere fact that one is president of a corporation does not render the property he owns or possesses the property of the corporation, since the president, as individual, and the corporation are separate entities.

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NATIONAL MARKETING CORPORATION (NAMARCO) vs. ASSOCIATED FINANCE COMPANY, INC, G.R. No. L-20886 April 27, 1967

NATIONAL MARKETING CORPORATION (NAMARCO) vs. ASSOCIATED FINANCE COMPANY, INC., and FRANCISCO SYCIP, FRANCISCO SYCIP

G.R. No. L-20886 April 27, 1967

Facts:

1. ASSOCIATED, through its President, Francisco Sycip, entered into an agreement to exchange sugar with NAMARCO whereby the former would deliver to the latter "Victorias" and/or "National" refined sugar in exchange for "Busilak" and "Pasumil" raw sugar belonging to NAMARCO.

2. Pursuant thereto, NAMARCO delivered to ASSOCIATED "Busilak" and "Pasumil" domestic raw sugar.

3. As ASSOCIATED failed to deliver to NAMARCO the "Victoria" and/or "National" refined sugar agreed upon, the latter, demanded in writing from the ASSOCIATED either immediate delivery thereof, or payment of its equivalent cash value.

4. As ASSOCIATED refused to deliver the raw sugar or pay for the refined sugar delivered to it, inspite of repeated demands therefore NAMARCO instituted the present action

Issue:

Whether Francisco Sycip may be held liable, jointly and severally with his co-defendant

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Ruling:

The evidence of record shows that, of the capital stock of ASSOCIATED, Sycip owned P60,000.00 worth of shares, while his wife — the second biggest stockholder — owned P20,000.00 worth of shares; that the par value of the subscribed capital stock of ASSOCIATED was only P105,000.00; that negotiations that lead to the execution of the exchange agreement in question were conducted exclusively by Sycip on behalf of ASSOCIATED; that, as a matter of fact, in the course of his testimony, Sycip referred to himself as the one who contracted or transacted the business in his personal capacity, and asserted that the exchange agreement was his personal contract; that it was Sycip who made personal representations and gave assurances that ASSOCIATED was in actual possession of the "Victorias" and/or "National" refined sugar which the latter had agreed to deliver to NAMARCO, and that the same was ready for delivery; that, as a matter of fact, ASSOCIATED was at that time already insolvent; that when NAMARCO made demands upon ASSOCIATED to deliver the refined sugar it was under obligation to deliver to the former, ASSOCIATED and Sycip, instead of making delivery of the sugar, offered to pay its value at the rate of P15.30 per bag — a clear indication that they did not have the sugar contracted for.

The foregoing facts can lead to no other conclusion than that Sycip was guilty of fraud because through false representations he succeeded in inducing NAMARCO to enter into the aforesaid exchange agreement, with full knowledge, on his part, on the fact that ASSOCIATED whom he represented and over whose business and affairs he had absolute control, was in no position to comply with the obligation it had assumed. Consequently, he cannot now seek refuge behind the general principle that a corporation has a personality distinct and separate from that of its stockholders and that the latter are not personally liable for the corporate obligations. It is justified in "piercing the veil of corporate fiction" and in holding Sycip personally liable, jointly and severally with his co-defendant, for the sums of money adjudged in favor of appellant.

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TAN BOON BEE & CO., INC. vs. THE HONORABLE HILARION U. JARENCIO, G.R. No. L-41337 June 30, 1988

TAN BOON BEE & CO., INC. vs. THE HONORABLE HILARION U. JARENCIO, PRESIDING JUDGE OF BRANCH XVIII of the Court of First Instance of Manila, GRAPHIC PUBLISHING, INC., and PHILIPPINE AMERICAN CAN DRUG COMPANY

G.R. No. L-41337 June 30, 1988

Facts:

1. Petitioner doing business under the name and style of Anchor Supply Co., sold on credit to Graphic Publishing, Inc. paper products.

2. GRAPHIC made partial payment by check to petitioner and a promissory note was executed to cover the balance.

3. For failure of GRAPHIC to pay any installment, petitioner filed a Civil case for a Sum of Money.

4. In a Decision the trial court ordered GRAPHIC to pay the petitioner.

5. On motion of petitioner, a writ of execution was issued by respondent judge; but the writ having expired without the sheriff finding any property of GRAPHIC, an alias writ of execution was issued.

6. Pursuant to the said issued alias writ of execution, the executing sheriff levied upon one unit printing machine found in the premises of GRAPHIC.

7. Said printing machine was scheduled for auction sale but Philippine American Drug Company had informed the sheriff that the printing machine is its property and not that of GRAPHIC.

8. The plaintiff, however, contends that the controlling stockholders of the PADC are also the same controlling stockholders of Graphic and, therefore, the levy upon the said machinery which was found in the premises occupied by the Graphic Publishing, Inc. should be upheld.

Issue:

Whether or not the corporate fiction of the two corporations shall be disregarded

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Ruling:

In the instant case, petitioner's evidence established that PADCO was never engaged in the printing business; that the board of directors and the officers of GRAPHIC and PADCO were the same; and that PADCO holds 50% share of stock of GRAPHIC. Petitioner likewise stressed that PADCO's own evidence shows that the printing machine in question had been in the premises of GRAPHIC since May, 1965, long before PADCO even acquired its alleged title on July 11, 1966 from Capitol Publishing. That the said machine was allegedly leased by PADCO to GRAPHIC on January 24, 1966, even before PADCO purchased it from Capital Publishing on July 11, 1966, only serves to show that PADCO's claim of ownership over the printing machine is not only farce and sham but also unbelievable.

Considering the principles and the circumstances established in this case, respondent judge should have pierced PADCO's veil of corporate Identity.

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