Corpo Case Digest

EPG CONSTRUCTION COMPANY, INC. VS COURT OF APPEAL.

G.R.NO. 103372

FACTS OF THE CASE

Petitioner EPG Construction Co., Inc. and the University of the Philippines, herein private respondent, entered into a contract for the construction of the UP Law Library Building for the stipulated price of P7, 545,000.00. Sometime in July, 1983, the private respondent complained to the petitioner that 6 air-conditioning units on the third floor of the building were not cooling properly. After inspection of the equipment, EPG agreed to shoulder the expenses for their repair, including labor and materials, in the amount of P38.000.00. For whatever reason, the repair was never undertaken. UP repeated its complaints to EPG, which again sent its representatives to assess the defects. Finally, it made UP a written offer to repair the system for P194, 000.00. UP insisted that EPG was obligated to repair the defects at its own expense under the guarantee provision in their contract. EPG demurred. UP then contracted with another company, which repaired the defects for P190, 000.00. The private respondent subsequently demanded from EPG reimbursement of the said amount plus an equal sum as liquidated damages. When the demand was rejected, UP sued EPG and its president, Emmanuel P. de Guzman, in the Regional Trial Court of Quezon City. De Guzman moved to dismiss the complaint as to him for lack of a cause of action, but the motion was denied. After trial, judgment was rendered by Judge Antonio P. Solano requiring both defendants jointly and severally to pay the plaintiff P190, 000.00 as actual damages, P50, 000.00 as liquidated damages, P10, 000.00 as attorney's fees, and costs.

ISSUE

The petitioners appealed to the Court of Appeals, which sustained the trial court. ¹ They then came to this Court to fault the respondent court for not holding that: 1) UP was estopped by its certificate of acceptance from imputing liability to EPG for the defects; 2) the defects were due to force majeure or fortuitous event; and 3) Emmanuel de Guzman has a separate personality from that of EPG Construction Co., Inc.

RULING

WHEREFORE, the appealed decision is AFFIRMED but with the modification that EPG Construction Co., Inc. shall be solely liable for the damages awarded in favor of the University of the Philippines. The final point of the petition is that Emmanuel P. de Guzman has a separate legal personality from EPG Construction Co., Inc. and should not be held solidarity liable with it. He stresses that the acts of the company are its own responsibility and there is no reason why any liability arising from such acts should be ascribed to him. Thus: It is a doctrine well-established and obtains both at law and in equity that a corporation is a distinct legal entity to be considered as separate and apart from the individual stockholders or members who compose it, and is not affected by the personal rights, obligations and transactions of its stockholders or members. ³The trial court did not explain why Emmanuel de Guzman was held solidarity liable with EPG Construction Co., Inc., and neither did the respondent court when it affirmed the appealed decision, In its Comment on the present petition, UP also did not refute the petitioners' argument and simply passed upon it sub silentio although the matter was squarely raised and discussed in the petition. Notably, when Emmanuel de Guzman moved to dismiss the complaint as to him, UP said in its opposition to the motion that it was suing him "in his official capacity and not in his personal capacity." His inclusion as President of the company was therefore superfluous, as De Guzman correctly contended, because his acts as such were corporate acts imputable to EPG itself as his principal. It is settled that; A corporation is invested by law with a personality separate and distinct from those of the persons composing it as well as from that of any other entity to which it may be related. Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate personality. The general manager of a corporation therefore should not be made personally answerable for the payment of the employee's back wages unless he had acted maliciously or in bad faith in terminating the services of the employee. ⁴The exception noted is where the official "had acted maliciously or in bad faith," in which event he may be made personally liable for his own act. That exception is not applicable in the case at bar, because it has not been proved that De Guzman acted maliciously or in bad faith when, as President of EPG, he sought to protect its interests and resisted UP's claims. Whatever damage was caused to UP as a result of his acts is the sole responsibility of EPG even though De Guzman was its principal officer and controlling stockholder.