Bustos v. Millians Shoe
REITERATIONFacts
The Antecedents: Spouses Fernando and Amelia Cruz owned a 464-square-meter lot. The City Government of Marikina levied the property for nonpayment of real estate taxes, and petitioner Joselito Hernand M. Bustos emerged as the winning bidder at auction. Subsequently, a new title was issued in petitioner's name. Meanwhile, notices of lis pendens were annotated on the original title, indicating that the property was included in the Stay Order issued in the rehabilitation proceedings of respondent Millians Shoe, Inc. (MSI). Procedural History: Petitioner moved for the exclusion of the subject property from the Stay Order, arguing it belonged to Spouses Cruz and was already auctioned to him. The Regional Trial Court (RTC) denied the motion, ruling that ownership had not yet transferred to petitioner as the redemption period had not lapsed when the Stay Order was issued. The Court of Appeals (CA) affirmed the RTC's decision, holding that Spouses Cruz, as stockholders of a close corporation, were personally liable for MSI's debts, and that petitioner's claim was time-barred. The Petition: Petitioner filed a Rule 45 Petition before the Supreme Court, assailing the CA's Decision and Resolution. He maintained that Spouses Cruz were not liable for MSI's debts, that the Stay Order undermined the taxing power of Marikina City, and that the time-bar rule did not apply to him as he was not a creditor of MSI.
Issue(s)
Whether the Court of Appeals correctly considered the properties of Spouses Cruz answerable for the obligations of MSI. Whether the Stay Order involving the assets of MSI correctly included the property covered by TCT No. N-126668. Whether petitioner Joselito Hernand M. Bustos was a creditor of MSI subject to the time-bar rule for opposing rehabilitation petitions.
Ruling
The Supreme Court granted the Petition, reversing and setting aside the Decision and Resolution of the Court of Appeals. The Court found no basis for the CA's conclusion that Spouses Cruz were personally liable for MSI's debts solely because they were stockholders of a supposed close corporation. The Court emphasized the doctrine of separate juridical personality and limited liability, holding that properties owned by stockholders cannot be included in the inventory of assets of a corporation under rehabilitation. Consequently, the Stay Order should not have included the subject property, and the time-bar rule did not apply to petitioner.
Ratio Decidendi
On whether the Court of Appeals correctly considered the properties of Spouses Cruz answerable for the obligations of MSI: The Supreme Court held that the CA erred in concluding that Spouses Cruz were personally liable for MSI's debts. The CA's basis for deeming MSI a close corporation was unsubstantiated, as it failed to refer to the Articles of Incorporation and did not establish the specific requirements for a close corporation under Section 96 of the Corporation Code. Mere allegation of being a close corporation is not evidence. Furthermore, the CA misconstrued Section 97 of the Corporation Code, which does not automatically make stockholders personally liable for corporate debts. Personal liability of stockholders in a close corporation is explicitly provided only under Section 100, paragraph 5, for corporate torts, requiring specific conditions such as active engagement in management, none of which were alleged or proven. The general doctrine of separate juridical personality and the principle of limited liability apply, meaning the corporate debt is not the debt of the stockholder, and a stockholder's property is not automatically corporate property. On whether the Stay Order involving the assets of MSI correctly included the property covered by TCT No. N-126668: The Supreme Court ruled that the Stay Order should not have included the subject property. The Court reiterated that stay orders in rehabilitation proceedings should only cover claims against the corporation or its properties. Properties merely owned by stockholders, even if they are officers, cannot be included in the inventory of assets of a corporation under rehabilitation, applying the doctrine of separate juridical personality. The case of Situs Development Corp. v. Asiatrust Bank was cited as analogous, where properties owned by stockholders, not the corporation, could not be subjected to rehabilitation proceedings. Therefore, since the subject property was owned by Spouses Cruz and not MSI, it could not be included in the rehabilitation proceedings. On whether petitioner Joselito Hernand M. Bustos was a creditor of MSI subject to the time-bar rule for opposing rehabilitation petitions: The Supreme Court determined that the time-bar rule under Rule 4, Section 6 of the Interim Rules of Procedure on Corporate Rehabilitation did not apply to petitioner. This rule directs creditors of the debtor to file an opposition within 10 days before the initial hearing. Since the subject property was found to be owned by Spouses Cruz and not MSI, petitioner was not a creditor of MSI but rather a holder of a claim against the respondent spouses. Therefore, his opposition to the inclusion of the property in MSI's rehabilitation proceedings was not subject to the 10-day reglementary period applicable to creditors of the debtor corporation.
Main Doctrine
The properties of stockholders, even if they are officers of a close corporation, cannot be included in the assets of the corporation subject to rehabilitation proceedings unless the separate juridical personality of the corporation is pierced, which requires specific grounds not present in this case. The CA erred in concluding that the Spouses Cruz were personally liable for MSI's debts solely based on their status as stockholders of a supposed close corporation without proof of the corporation's articles of incorporation and without establishing the requisites for personal liability under the Corporation Code.