Corpo Case Digest

UMALI ET, AL. VS. COURT OF APPEALS

G.R. No. 89561 September 13, 1990

FACTS OF THE CASE

Santiago Rivera is the nephew of plaintiff Mauricia Meer Vda. de Castillo. The Castillo family is the owners of a parcel of land located in Lucena City which was given as security for a loan from the Development Banks of the Philippines. For their failure to pay the amortization, foreclosure of the said property was about to be initiated. This problem was made known to Santiago Rivera, who proposed to them the conversion into subdivision of the four (4) parcels of land adjacent to the mortgaged property to raise the necessary fund. 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 Santiago Rivera and the Castillo family. In this agreement, Santiago Rivera obliged himself to pay the Castillo family the sum of P70, 000.00 immediately after the execution of the agreement and to pay the additional amount of P400, 000.00 after the property has been converted into a subdivision. Rivera, armed with the agreement, approached Mr. Modesto Cervantes, President of defendant Bormaheco, and proposed to purchase from Bormaheco two (2) tractors Model D-7 and D-8. Subsequently, a Sales Agreement was executed on December 28, 1970, which was accepted by the latter and executed Sales Agreement. The balance of the consideration was secured by a surety bond from ICP (Insurance Corporation of the Phil.) which was in turn secured by a mortagage, the properties of the Castillos.

ISSUE

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

RULING

The doctrine of piercing the veil of corporate fiction has no application to the 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 therefore. 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.