CKH Industrial Development Corp. v. Court of Appeals

G.R. No. 111890, 7 May 1997

FACTS:

 The records disclose that petitioner CKH is the owner of two parcels of land, consisting of 4,590 sq. m. and 300 sq. m. respectively, located in Karuhatan, Valenzuela, and covered by Transfer Certificates of Title Nos. 8710 and 8711, Register of Deeds of Caloocan City (now Register of Deeds District III [Valenzuela]). CKH is a corporation established under Philippine law by the late Cheng Kim Heng (Cheng), an immigrant of Chinese descent. Upon Cheng’s demise, control over the petitioner corporation was transferred to Rubi Saw, also of Chinese descent, and Cheng’s second wife.

It also appears that before coming to the Philippines, Cheng Kim Heng was married to Hung Yuk Wah (Wah), who lived in Hongkong together with their children, Chong Tak Kei, (Kei), Chong Tak Choi (Choi), and Chong Tak Yam (Yam). After Cheng immigrated to the Philippines in 1976, and married Rubi Saw in 1977, he brought his first wife, Heng, and their children to this country, and established himself and his Chinese family as naturalized Filipino citizens. Heng died in 1984.

On May 8, 1988, Rubi Saw and Lourdes Chong, the wife of Cheng’s son, Kei, met at the 1266 Soler St., Sta. Cruz, Manila, the residence of Cheng’s friend, Uy Chi Kim, and executed a Deed of Absolute Sale, whereby Rubi Saw, representing CKH, agreed to sell the subject properties to Century-Well, a corporation owned in part by Lourdes Chong, Kei and Choi.

ISSUE:

 Whether or not there is a valid compensation of the obligations of Cheng Kim Heng to his sons with the purchase price of the sale.

RULING:

In the instant case, there can be no valid compensation of the purchase price with the obligations of Cheng Kim Heng reflected in the promissory notes, for the reason that CKH and Century-Well the principal contracting parties, are not mutually bound as creditors and debtors in their own name. A close scrutiny of the promissory notes does not indicate the late Cheng, as then president of CKH, acknowledging any indebtedness to Century-Well. As worded, the promissory notes reveal CKHs indebtedness to Chong Tak Choi and Chong Tak Kei.

Thus, their interest in the promissory notes cannot be offset against the obligations between CKH and Century-Well arising out of the deed of absolute sale, absent any allegation, much less, even a scintilla of substantiation, that Choi and Keis interest in Century-Well are so considerable as to merit a declaration of unity of their civil personalities. Under present law, corporations, such as Century-Well, have personalities separate and distinct from their stockholders, except only when the law sees it fit to pierce the veil of corporate identity, particularly when the corporate fiction is shown to be used to defeat public convenience, justify wrong, protect fraud or defend crime, or where a corporation the mere alter ego or business conduit of a person. The Court cannot, in this instance make such a ruling absent a demonstration of the merit of such a disposition.

Considering the foregoing premises, the Court finds it proper to grant the prayer for rescission of the subject deed of sale, for failure of consideration.

 * Case digest by Lady Rubyge Denura, LLB-1, Andres Bonifacio Law School, SY 2017-2018

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