G.R. No. 154549, 30 May 2011

FACTS:

The petitioner was an incorporator and original director of BMPI which had an authorized capital stock of three million pesos divided into 300,000 shares each with a par value of ten pesos of which 75,000 were initially subscribed.

Printwell engaged in commercial and industrial printing. BMPI commissioned Printwell for theprinting of the magazine Philippines, Inc. (together with wrappers and subscription cards) thatBMPI published and sold. For that purpose, Printwell extended 30-day credit accommodations to BMPI.

BMPI placed with Printwell several orders on credit, evidence by invoices and delivery receipts. Considering that BMPI paid only 25,000 pesos, printwell sued BMPI for the collection of the unpaid balance in the RTC. Printwell amended the complaint in order to implead as defendants all the original stockholders and incorporators to recover on their unpaid subscriptions.

Defendants filed a consolidated answer averring that they all had paid their subscriptions in full; that BMPI had a separate personality from those of its stockholders. To prove payment of their subscriptions, the defendant stockholders submitted in evidence BMPI official receipt, an audit report, BMPI balance sheet and income statement, income tax return, journal vouchers, cash deposit slips and BPI savings account passbook in the name of BMPI.

ISSUE:

Whether the propriety of disregarding the separate personalities of BMPI and its stockholders by piercing the thin veil that separated them.

RULING:

Although a corporation has a personality separate and distinct from those of its stockholders, directors, or officers, such separate and distinct personality is merely a fiction created by law for the sake of convenience and to promote the ends of justice.

The corporate personality may be disregarded, and the individuals composing the corporation will be treated as individuals, if the corporate entity is being used as a cloak or cover for fraud or illegality;as a justification for a wrong; as an alter ego, an adjunct, or a business conduit for the sole benefit of the stockholders.

As a general rule, a corporation is looked upon as a legal entity, unless and until sufficient reason to the contrary appears.

Thus,the courts always presume good faith, andfor that reason accord prime importance to the separate personality of the corporation, disregarding the corporate personality only after the wrongdoing is first clearly and convincingly established. It thus behooves the courts to be careful in assessing the milieu where the piercing of the corporate veil shall be done.

Although nowhere in Printwell’s amended complaint or in the testimonies Printwell offered can it be read or inferred from that the petitioner was instrumental in persuading BMPI to renege onits obligation to pay; or that sheinduced Printwell to extend the credit accommodation by misrepresenting the solvency of BMPI to Printwell, her personal liability, together with that of her co-defendants, remained because the CA found her and the other defendant stockholders to be in charge of the operations of BMPI at the time the unpaid obligation was transacted and incurred, to wit:In the case at bench, it is undisputed that BMPI made several orders on credit from appellee PRINTWELL involving the printing of business magazines, wrappers and subscription cards, in the total amount of ₱291,342.76 (Record pp. 3-5, Annex “A”) which facts were never denied by appellants’ stockholders that they owe(d) appellee the amount of ₱291,342.76.

The said goods were delivered to and received by BMPI but it failed to pay its overdue account to appellee as well as the interest thereon, at the rate of 20% per annum until fully paid. It was also during this time that appellants stockholders were in charge of the operation of BMPI despite the fact that they were not able to pay their unpaid subscriptions to BMPI yet greatly benefited from said transactions.

In view of the unpaid subscriptions, BMPI failed to pay appellee of its liability, hence appellee in order to protect its right can collect from the appellants stockholders regarding theirunpaid subscriptions. To deny appellee from recovering from appellants would place appellee ina limbo on where to assert their right to collect from BMPI since the stockholders who areappellants herein are availing the defense of corporate fiction to evade payment of its obligations.

It follows, therefore, that whether or not the petitioner persuaded BMPI to renege on its obligations to pay, and whether or not she induced Printwell to transact with BMPI were not good defenses in the suit.

*Case Digest by Jhazel Zhan Jebone, JD-4, Andres Bonifacio Law School, SY 2019-2020