G.R. No. 191525, 13 December 2017
Atty. Emmanuel T. Santos (Santos), a lessee to two buildings owned by Litton, owed the latter rental arrears as well as his share of the payment of realty taxes. Consequently, Litton filed a complaint for unlawful detainer against Santos before the MeTC of Manila. The MeTC ordered Santos to vacate A.I.D. Building and Litton Apartments and to pay various sums of money.
It appears however that the judgment was not executed. Litton subsequently filed an action for revival of judgment, which was granted by the RTC. Santos then appealed the RTC decision to the CA, which nevertheless affirmed the RTC. The said CA decision became final and executory.
The sheriff of the MeTC of Manila levied on a piece of real property registered in the name of International Academy of Management and Economics Incorporated (I/AME), in order to execute the judgment against Santos. The annotations on said property indicated that such was “only up to the extent of the share of Emmanuel T. Santos.”
I/AME filed with MeTC a Motion to Lift or Remove Annotations. I/AME claimed that it has a separate and distinct personality from Santos; hence, its properties should not be made to answer for the latter’s liabilities. The motion was denied.
Upon motion for reconsideration of I/AME, the MeTC reversed its earlier ruling and ordered the cancellation of the annotations of levy as well as the writ of execution. Litton then elevated the case to the RTC, which in turn reversed the Order granting I/AME’s motion for reconsideration.
I/AME then filed a petition with the CA to contest the judgment of the RTC, which was eventually denied by the appellate court.
Whether it is proper for the court to pierce the corporate veil of I/AME and its property to answer for the liability of Santos.
Piercing the corporate veil may apply to non-stock corporations.
In the United States, from which we have adopted our law on corporations, non-profit corporations are not immune from the doctrine of piercing the corporate veil. Their courts view piercing of the corporation as an equitable remedy, which justifies said courts to scrutinize any organization however organized and in whatever manner it operates.
Piercing the corporate veil may apply to natural persons:
a) When the corporation is the alter ego of a natural person
The piercing of the corporate veil may apply to natural persons involved with corporations. Corporate mask may be lifted and the corporate veil may be pierced when a corporation is just but the alter ego of a person or of another corporation.
b) Reverse piercing of the corporate veil
In a reverse piercing action, the plaintiff seeks to reach the assets of a corporation to satisfy claims against a corporate insider. Reverse-piercing flows in the opposite direction of traditional corporate veil-piercing and makes the corporation liable for the debt of the shareholders.
It has two types: outsider reverse piercing and insider reverse piercing. Outsider reverse piercing occurs when a party with a claim against an individual or corporation attempts to be repaid with assets of a corporation owned or substantially controlled by the defendant. In contrast, in insider reverse piercing, the controlling members will attempt to ignore the corporate fiction in order to take advantage of a benefit available to the corporation, such as an interest in a lawsuit or protection of personal assets.
*Case digest by Teonilo M. Bagalanon Jr., JD – 4, Andres Bonifacio College, SY 2019 – 2020