Corpo Case Digest

PALAY, INC. vs. CLAVE

G.R.No. L-56076

FACTS OF THE CASE

On March 28, 1965, petitioner Palay, Inc., through its President, Albert Onstott executed in favor of private respondent, Nazario Dumpit, a Contract to sell a parcel of Land in Antipolo, Rizal owned by said corporation. The sale price was P23, 300.00 with 9% interest per annum, payable with a down payment of P4, 660.00 and monthly installments of P246.42 until fully paid.

Paragraph 6 of the contract provided for automatic extrajudicial rescission upon default in payment of any monthly installment after the lapse of 90 days from the expiration of the grace period of one month, without need of notice and with forfeiture of all installments paid. Respondent Dumpit paid the down payment and several installments amounting to P13, 722.50. The last payment was made on December 5, 1967 for installments up to September 1967.

On May 10, 1973, or almost six (6) years later, private respondent wrote petitioner offering to update all his overdue accounts with interest, and seeking its written consent to the assignment of his rights to a certain Lourdes Dizon. In response, petitioners informed respondent that his Contract to Sell had long been rescinded pursuant to paragraph 6 of the contract, and that the lot had already been resold.

A complaint was filed by the respondent with the NHA for conveyance with an alternative prayer for refund. The NHA, in its resolution, ordered Palay, Inc. and Alberto Onstott in his capacity as President of the corporation, jointly and severally, to refund immediately to respondent the amount paid with 12% interest from the filing of complaint. Respondent Presidential Executive Assistant Clave affirmed the NHA resolution.

ISSUE

1. Whether the doctrine of piercing the veil of corporate fiction has application to the case.

2. Whether petitioner On Stott can be held solidarity liable with petitioner Corporation for the refund of the installment payments made by respondent Dump it.

RULING

The doctrine of piercing the veil of corporate fiction has no application to the case. Consequently, petitioner Onstott cannot be held solidarity liable with petitioner Corporation for the refund of the installment payments made by respondent Dumpit.

A corporation is invested by law with a personality separate and distinct from those of the persons composing it. As a general rule, a corporation may not be made to answer for acts or liabilities of its stockholders or those of the legal entities to which it may be connected and vice versa.

However, the veil of corporate fiction may be pierced when: it is used as a shield to further an end subversive of justice; or for purposes that could not have been intended by the law that created it; or to defeat public convenience, justify wrong, protect fraud, or defend crime; or to perpetrate fraud or con fuse legitimate issues; or to circumvent the law or perpetuate deception; or as an alter ego, adjunct or business conduit for the sole benefit of the stockholders. In this case however, there are no badges of fraud on the part of the petitioners. They had literally relied, although mistakenly, on paragraph 6 of the contract with respondent when they rescinded the contract to sell extra judicially.

Although On Stott appears to be the controlling stockholder, there being no fraud, he cannot be made personally liable.