Corporation v. Evangelista
REITERATIONFacts
The Antecedents: Respondents, engaged in the business of buying broiler eggs and selling hatchlings and by-products, utilized the hatchery services of ASJ Corporation, owned by petitioner Antonio San Juan and his family. Respondents delivered eggs to ASJ Corp. for incubation and hatching, with an agreed service fee per egg. Initially, service fees were paid promptly, but over time, respondents incurred an accumulated balance of service fees. On January 13 to February 3, 1993, respondents delivered 101,350 eggs under Setting Report Nos. 108 to 113. When respondents attempted to pick up the chicks and by-products from Setting Report No. 108 on February 3, 1993, San Juan refused to release them due to the outstanding balance, despite accepting partial payments and a new delivery of eggs. This refusal continued for subsequent setting reports, and San Juan allegedly made threats against the respondents, causing them to fear returning to the hatchery. Procedural History: Respondents filed a complaint for damages against ASJ Corporation and Antonio San Juan for the unjustified retention of chicks and egg by-products. The Regional Trial Court (RTC) ruled in favor of the respondents, finding the petitioners solidarily liable for actual damages, moral damages, and attorney's fees, and piercing the veil of corporate fiction. Both parties appealed to the Court of Appeals. The Court of Appeals affirmed the RTC's decision with a modification, adding an award of exemplary damages. The appellate court also applied the doctrine of piercing the corporate veil, holding ASJ Corp. and San Juan as one entity due to a lack of bona fide intention to treat the corporation as separate from San Juan and his wife. The Petition: Petitioners seek review of the Court of Appeals' decision, assigning several errors. They argue that the appellate court erred in holding them liable for withholding chicks and by-products from Setting Report Nos. 108 and 109, in admitting hearsay testimony, and in not finding that respondents failed to retrieve the products from Setting Report Nos. 110 to 113. Crucially, petitioners challenge the piercing of the corporate veil and the subsequent joint and several liability. They also contest the awards for moral, exemplary damages, and attorney's fees, and seek the award of their counterclaim. The petition raises both factual and legal issues, including whether the retention of goods was justified and whether the corporate fiction should have been disregarded.
Issue(s)
Whether the Court of Appeals erred in affirming the RTC Decision holding petitioners ASJ Corporation and Antonio San Juan solidarily liable, and whether the doctrine of piercing the veil of corporate fiction was correctly applied.
Ruling
The petition is denied. The Decision of the Court of Appeals dated April 30, 2003, in CA-G.R. CV No. 56082, is affirmed, holding ASJ Corporation and Antonio San Juan solidarily liable to respondents Sps. Efren & Maura Evangelista.
Ratio Decidendi
On the issue of solidary liability and piercing the veil of corporate fiction: The Court affirmed the Court of Appeals' decision, holding that the RTC and CA did not err in finding ASJ Corporation and Antonio San Juan solidarily liable. The appellate court correctly applied the doctrine of piercing the veil of corporate fiction. This doctrine is a remedy applied by courts when a corporation is found to be a mere alter ego or business conduit of a person, or when it is used to perpetrate fraud, defeat public convenience, or justify wrong, or to evade any obligation or responsibility under the law. The facts presented showed that ASJ Corporation was a family corporation, and the transactions were personal in nature, with San Juan tolerating payment delays to maintain goodwill. The unjustified retention of the respondents' chicks and egg by-products, which were the fruits of their own eggs and labor, constituted a wrong that warranted piercing the corporate veil to hold San Juan personally liable alongside the corporation. The Court reiterated that the separate juridical personality of a corporation is a privilege, not a right, and it may be disregarded when its use becomes an instrument of injustice. Therefore, the solidary liability imposed was justified to ensure that the respondents were compensated for the unjustified retention of their property.
Main Doctrine
The corporate veil may be pierced when a corporation is used to perpetrate fraud, defeat public convenience, or justify wrong, or to evade any obligation or responsibility under the law. In this case, the Court of Appeals correctly applied the doctrine of piercing the veil of corporate fiction to hold the individual petitioner solidarily liable with the corporation for the unjustified retention of respondents' property.