Arcilla v. Court of Appeals
REITERATIONFacts
The Antecedents: Private respondent filed a collection suit against petitioner for P93,358.51, representing various items, cash, and checks obtained on credit from late 1981 to early 1983, evidenced by thirty "vales" signed by the petitioner or his authorized representatives. Petitioner alleged that these transactions were for a "pro-forma" invoice to support a loan for his family corporation, CSAR Marine Resources, Inc., with the Kilusang Kabuhayan at Kaunlaran (KKK). Procedural History: The Regional Trial Court (RTC) ruled that the "vales" remained unpaid and ordered petitioner to pay the total amount, plus interest, attorney's fees, and costs. The Court of Appeals (CA) affirmed the RTC decision. Petitioner moved for reconsideration, alleging payment and presenting a letter from Universal Enterprises (owned by private respondent) stating CSAR Marine Resources, Inc.'s account was only P23,639.33. The CA granted a new trial based on this "newly discovered evidence" and subsequently issued an Amended Decision ordering petitioner, in his capacity as President of CSAR Marine Resources, Inc., to pay the outstanding balance of P23,639.33, plus interest and fees. Petitioner sought clarification, arguing that CSAR Marine Resources, Inc. was not a party to the suit and that his personal liability was unclear. The CA denied this motion, stating the corporate veil should be pierced. The Petition: Petitioner filed a petition with the Supreme Court, arguing that the CA erred in holding CSAR Marine Resources, Inc. liable without being impleaded and in not dismissing the case against him personally.
Issue(s)
Whether the Court of Appeals erred in holding CSAR Marine Resources, Inc. liable to the private respondent without it being impleaded as a party. Whether the Court of Appeals erred in not dismissing the case against the petitioner personally.
Ruling
The petition is denied for utter lack of merit. The Court affirmed the Amended Decision of the Court of Appeals, holding petitioner personally liable for the outstanding balance.
Ratio Decidendi
On the issue of holding CSAR Marine Resources, Inc. liable without being impleaded: The Supreme Court held that the petition's first assigned error, which seeks to benefit CSAR Marine Resources, Inc., cannot be granted because the corporation was not a party to the main case and did not seek to intervene. Therefore, it has no personality to seek a review of the decision. Furthermore, the Court clarified that the Amended Decision did not direct the corporation to pay; rather, it declared the petitioner liable. The phrase "in his capacity as President of Csar Marine Resources, Inc." did not absolve the petitioner from personal responsibility, especially since the Court of Appeals, in resolving the motion for clarificatory judgment, pierced the veil of corporate fiction. On the issue of not dismissing the case against the petitioner personally: The Supreme Court found no merit in the petitioner's attempt to avoid personal liability by invoking the separate corporate identity of CSAR Marine Resources, Inc. The Court noted that the petitioner, a lawyer, was merely taking advantage of the phrase "in his capacity as President" in the Amended Decision. The Court emphasized that the petitioner had previously admitted that the KKK loan, which led to the "vales," was "his loan" and that the corporation was used as a conduit. Moreover, the petitioner failed to set up the defense of separate corporate obligation in his Answer, constituting a waiver of such defense. The Court also pointed out that the petitioner did not assign as an error in his Brief the trial court's holding that he was solely liable. The Court concluded that CSAR Marine Resources, Inc. was merely the petitioner's business conduit and alter ego, justifying the piercing of the corporate veil.
Main Doctrine
The fiction of separate corporate personality may be disregarded and the corporate veil pierced when the corporation is used as a business conduit or alter ego, especially when the individual involved, who is also an officer, fails to set up the defense of separate corporate identity in his pleadings and uses the corporation for personal purposes.