Adelio C. Cruz vs Quiterio L. DalisayAdm. Matter No. R-181-P July 31, 1987

Fernan, J:Administrative Matter in the Supreme Court.

Malfeasance in office, corrupt practices and serious irregularities.Doctrine: A corporation has a personality distinct and separate from its individual stockholders or members.

Facts:

1. In a sworn complaint dated July 23, 1984, Adelio Cruz (complainant) charged Quiterio Dalisay (respondent), Senior Deputy Sheriff of Manila, with malfeasance in office, corrupt practices and serious irregularities allegedly committed as follows:

a. Respondent attached and/or levied the money belonging to complainant Cruz when he was not himself the judgment debtor in the final judgment of an NLRC case sought to be enforced but rather the company known as Qualitrans Limousine Service, Inc..b. Respondent also caused the service of the alias writ of execution upon complainant who is a resident of Pasay City, despite knowledge that his territorial jurisdiction covers Manila only and does not extend to Pasay City.

2. In his Comment, respondent explained that when he garnished complainants cash deposit at the Philtrust bank he was merely performing a ministerial duty. And that while it is true that said writ was addressed to Qualitrans Limousine Service, Inc., it is also a fact that complainant had executed an affidavit before the Pasay City assistant fiscal stating that he is the owner/ president of Qualitrans. Because of that declaration, the counsel for the plaintiff in the labor case advised him to serve notice of garnishment on the Philtrust bank.3. On November 12, 1984 this case was referred to the executive judge of the RTC of Manila for investigation, report and recommendation. However, prior to the termination of the proceedings, complainant executed an affidavit of desistance stating that he is no longer interested in prosecuting the case and that there was just a misunderstanding between complainant and respondent.

4. On May 29, 1986, acting on respondents motion the executive judge issued an order recommending the dismissal of the case.

Issue: WON the complaint should be dismissed based on complainants motion of desistance.Held: NO

Reason:1. It has been held that desistance of complainant does not preclude the taking of disciplinary action against respondent.

2. Respondents actuation in enforcing a judgment against complainant who is not a judgment debtor in the case calls for disciplinary action. What is incumbent upon respondent is to ensure that only the portion of a decision ordained or decreed in the dispositive part should be the subject of the execution.

3. The tenor of the NLRC judgment and the implementing writ is clear enough. It directed Qualitrans Limousine Service, inc., to reinstate the discharged employees and pay them full backwages. Respondent, however, choose to pierce the veil of corporate entity usurping a power belonging to the court and assumed improvidently that since the complainant is the owner/president of Qualitrans Limousine Service, Inc., they are one and the same. It is a well settled doctrine both in law and equity that as a legal entity, a corporation has a personality distinct and separate from its individual stockholders or members.4. The mere fact that one is president of the corporation does not render the property he owns or possesses the property of the corporation, since that president, as an individual, and the corporation are separate entities.Decision: ACCORDINGLY, we find Respondent Deputy Sheriff Quiterio l. Dalisay NEGLIGENT in the enforcement of the writ of execution in NLRC Case No. 8-12389-91, and a fine equivalent to 3 months salary is hereby imposed with a stern warning that the commission of the same or similar offense in the future will merit a heavier penalty. Let a copy of the Resolution be filed in the personal record of the respondent.269 SCRA 15 Business Organization Corporation Law Piercing the Veil of Corporate FictionFilriters Guaranty Assurance Corporation (FGAC) is the owner of several Central Bank Certificates of Indebtedness (CBCI). These certificates are actually proof that FGAC has the required reserveinvestmentwith the Central Bank to operate as an insurer and to protect third persons from whatever liabilities FGAC may incur. In 1979, FGAC agreed to assign said CBCI to Philippine Underwriters Finance Corporation (PUFC). Later, PUFC sold said CBCI to Traders Royal Bank (TRB). Said sale with TRB comes with a right to repurchase on a date certain. However, when the day to repurchase arrived, PUFC failed to repurchase said CBCI hence TRB requested the Central Bank to have said CBCI be registered in TRBs name. Central Bank refused as it alleged that the CBCI are not negotiable; that as such, the transfer from FGAC to PUFC is not valid; that since it was invalid, PUFC acquired no valid title over the CBCI; that the subsequent transfer from PUFC to TRB is likewise invalid.

TRB then filed a petition for mandamus to compel the Central Bank to register said CBCI in TRBs name. TRB averred that PUFC is the alter ego of FGAC; that PUFC owns 90% of FGAC; that the two corporations have identical sets of directors; that payment of said CBCI to PUFC is like a payment to FGAC hence the sale between PUFC and TRB is valid. In short, TRB avers that that the veil of corporate fiction, between PUFC and FGAC, should be pierced because the two corporations allegedly used their separate identity to defraud TRD into buying said CBCI.

ISSUE:Whether or not Traders Royal Bank is correct.

HELD:No. Traders Royal Bank failed to show that the corporate fiction is used by the two corporations to defeatpublicconvenience, justify wrong, protect fraud or defend crime or where a corporation is a mere alter ego or business conduit of a person. TRB merely showed that PUFC owns 90% of FGAC and that their directors are the same. The identity of PUFC cant be maintained as that of FGAC because of this mere fact; there is nothing else which could lead the court under the circumstance to disregard their corporate personalities. Further, TRB cant argue that it was defrauded into buying those certificates. In the first place, TRB as a banking institution is not ignorant about these types of transactions. It should know for a fact that a certificate of indebtedness is not negotiable because the payee therein is inscribed specifically and that the Central Bank is obliged to pay the named payee only and no one else.