Jacinto v. Court of Appeals
REITERATIONFacts
The Antecedents: Petitioner Roberto A. Jacinto was a co-defendant with Inland Industries, Inc. in a case filed by Metropolitan Bank and Trust Company (MBTC) for the recovery of a principal obligation amounting to P382,015.80, plus interest and attorney's fees. The obligation arose from trust receipts signed by petitioner in behalf of Inland Industries, Inc. Procedural History: The Regional Trial Court (RTC) of Manila, Branch 11, rendered a decision ordering defendants, jointly and severally, to pay MBTC the principal obligation with interest and attorney's fees. The Court of Appeals (CA) affirmed the RTC decision in toto. The Petition: Petitioner appealed to the Supreme Court, seeking to set aside the CA decision. He raised issues concerning the CA's authority to pierce the corporate veil of Inland Industries, Inc. without specific allegations in the complaint and without sufficient proof.
Issue(s)
Whether the Court of Appeals can validly pierce the fiction of corporate identity of Inland Industries, Inc. despite the absence of an allegation in the complaint and prayer for such relief. Whether the Court of Appeals can validly pierce the fiction of corporate identity of Inland Industries, Inc. without sufficient proof to justify it.
Ruling
The petition is dismissed for lack of merit. The Supreme Court affirmed the decision of the Court of Appeals, holding that the corporate veil of Inland Industries, Inc. could be validly pierced and that petitioner Roberto A. Jacinto was personally liable.
Ratio Decidendi
On the issue of piercing the corporate veil without specific allegations: The Supreme Court held that the corporate veil could be pierced even without a specific allegation in the complaint, provided that issues not raised in the pleadings are tried by the express or implied consent of the parties. In this case, subsequent developments, including the stipulation of facts and presentation of evidence, showed that MBTC sought to prove that petitioner and the corporation were one, and petitioner did not raise serious objections. Section 5 of Rule 10 of the Rules of Court allows for amendments to conform to or authorize the presentation of evidence, and issues tried with implied consent are treated as if they were raised in the pleadings. The Court cited that "when evidence is presented by one party, with the express or implied consent of the adverse party, as to issues not alleged in the pleadings, judgment may be rendered validly as regards those issues, which shall be considered as if they have been raised in the pleadings." On the issue of piercing the corporate veil without sufficient proof: The Supreme Court found that the findings of the lower courts were overwhelmingly supported by the evidence. The trial court found that petitioner was "practically the corporation itself." The Court of Appeals noted that petitioner tried to escape liability by shifting blame to the corporation, asserting he signed in his official capacity. However, the evidence showed that petitioner and his wife owned 52% of the corporation's stocks. Petitioner's conflicting statements regarding his role and the corporation's officers further cast doubt on his credibility. The stipulation of facts explicitly stated that petitioner, as President and General Manager, received the goods and signed the trust receipts for and in behalf of Inland Industries, Inc. The Court reiterated the principle that "when the veil of corporate fiction is made as a shield to perpetuate fraud and/or confuse legitimate issues, the same should be pierced," and "Where a corporation is merely an adjunct, business conduit or alter ego, the fiction of separate and distinct corporate entity should be disregarded."
Main Doctrine
The corporate veil may be pierced when it is used as a shield to perpetuate fraud or confuse legitimate issues, or when a corporation is merely an adjunct, business conduit, or alter ego of an individual. Evidence presented and tried with the implied consent of the parties, even if not alleged in the pleadings, may be considered by the court.