Saverio v. Puyat
REITERATIONFacts
The Antecedents: Respondent Alfonso G. Puyat granted a loan to petitioner NS International, Inc. (NSI), represented by petitioner Nuccio Saverio, evidenced by a Memorandum of Agreement and Promissory Note. NSI received P300,000.00 and certain machineries for a fertilizer processing plant business. Despite Nuccio Saverio making personal payments totaling P600,000.00, an alleged outstanding balance of P460,505.86 remained as of December 16, 1999, which included the value of the machineries. The proposed business failed to materialize. Procedural History: The respondent filed a collection suit against the petitioners with the Regional Trial Court (RTC) of Makati City, Branch 136. The RTC ruled in favor of the respondent, finding both petitioners jointly and severally liable for the outstanding balance, applying the doctrine of piercing the veil of corporate fiction, and awarding attorney's fees. The petitioners appealed to the Court of Appeals (CA), which affirmed the RTC's decision. The CA denied the petitioners' motion for reconsideration, leading to the present petition. The Petition: The petitioners seek review on certiorari under Rule 45 of the Rules of Court, arguing that the CA erred in affirming the RTC's decision. They contend that the Breakdown of Account, used as the basis for the award, is hearsay as the preparer was not presented, and that a proper accounting is necessary to determine the exact amount of indebtedness. Furthermore, they argue that piercing the veil of corporate fiction was unjustified, as there was no sufficient showing that NSI was used to commit fraud or that Nuccio had absolute control over the corporation beyond his 40% shareholding.
Issue(s)
Whether the Court of Appeals committed a reversible error in affirming the RTC’s decision holding the petitioners jointly and severally liable for the amount claimed; and whether a proper accounting was necessary to determine the exact amount of indebtedness. Whether the veil of corporate fiction should be pierced to hold Nuccio Saverio personally liable for the obligations of NSI. Whether the award of attorney's fees was proper.
Ruling
The Supreme Court granted the petition, reversed and set aside the decisions of the CA and RTC, and remanded the case to the RTC for proper accounting and reception of evidence to determine the actual amount of NSI's indebtedness. The Court held that Nuccio Saverio should not be held jointly and severally liable with NSI.
Ratio Decidendi
On the necessity of accounting and the alleged reversible error: The Court agreed with the petitioners that a remand for proper accounting was necessary. While the fact of indebtedness was undisputed, the determination of the exact amount was not, due to the lack of supporting documentary and testimonial evidence for the 'Breakdown of Account.' The RTC and CA relied heavily on this document without sufficient substantiation or clear computation of the award, including interest and penalties. The Court found it unacceptable for the lower courts to simply conclude the remaining indebtedness without showing how the balance was arrived at, especially after a substantial partial payment. The Court reiterated that while factual issues are generally not for the Supreme Court to resolve, exceptions exist, such as when findings are based on speculation or a misapprehension of facts, as was the case here regarding the computation of the debt. On piercing the veil of corporate fiction: The Court held that the circumstances did not warrant piercing the veil of NSI's corporate fiction. The general rule is that a corporation has a personality separate and distinct from its stockholders. Mere ownership of capital stock, even a majority or all of it, is not sufficient to disregard this separate personality. Additional circumstances showing fraud, injustice, or complete control used to commit a wrong must be proven. The RTC's reasons—lack of a board resolution, shared counsel, NSI's lack of objection, and Nuccio's admission of 'NS' standing for 'Nuccio Saverio'—were deemed insufficient. The Court found no clear and convincing evidence that Nuccio had control or domination over NSI's finances, nor that the corporation was used to commit fraud. The failure of the business plan was not, by itself, proof of fraudulent intent justifying the piercing of the corporate veil. Therefore, Nuccio should not be held jointly and solidarily liable for NSI's unpaid loan. On attorney's fees: The Court found the respondent's entitlement to attorney's fees justified as he was forced to litigate. However, in view of the partial payment made, the award of 25% attorney's fees was reduced to 10% of the total amount due. The appearance fee and litigation costs were affirmed.
Main Doctrine
The Supreme Court remanded the case for proper accounting to determine the actual amount of indebtedness, finding that the lower courts' reliance on an unsubstantiated 'Breakdown of Account' was insufficient. The Court also reversed the piercing of the corporate veil, holding that mere 40% stock ownership and the absence of a board resolution were insufficient grounds to disregard the separate corporate personality of NSI.