san juan vs. ca case digest

7/27/2019 San Juan vs. CA Case Digest

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On Feb. 14, 1989, petitioner San Juan Structural and SteelFabricators entered into an agreement with Motorich SalesCorporation through Nenita Gruenberg, corporate treasurer ofMotorich, for the transfer to the former a parcel of land .

An Agreement was executed on the same day, whichstipulated that petitioner paid P100,000.00 as downpaymentand that the balance is to be paid on or before March 2,1989.

On March 1, 1989, Mr. Andres T. Co, president San Juan,wrote a letter to Motorich requesting for a computation of thebalance to be paid.

On March 2, 1989, petitioner was ready with the amountcorresponding to the balance. The parties were supposed tomeet in the of fice of the petitioner but Nenita did not appear.

FACTS:


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Despite repeated demands of the petitioner, Motorichhad refused to execute the Transfer of Rights/Deed ofAssignment which is necessary to transfer the cer tificateof title to the former.

The TCT of the subject land was still in the name of ACLDevelopment Corporation.

On April 6, 1989, defendant ACL DevelopmentCorporation and Motorich Sales Corporation entered intoa Deed of Absolute Sale whereby the former transferredto the latter the subject property.

As a result, petitioner filed a complaint for damagesagainst the Motorich and Nenita, et al.


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In its answer, Motorich and Nenita interposed asaffirmative defense that the President and Chairman ofMotorich did not sign the agreement; that Mrs.Gruenberg's signature on the agreement is inadequateto bind Motorich as the other signature.

It was also alleged that San Juan knew this from thevery beginning as it was presented a copy of theTransfer of Rights at the time the Agreement wassigned.


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On June 18, 1994, the RTC dismissed San Juanscomplaint, finding that Nenita Lee Gutenberg wasnot authorized by the corporation to dispose of theproperty as such disposition is governed by therequirements of Section 40, Corporation Code; andthat Nenita Lee Gutenberg did not in anywaymisrepresent herself to be authorized by thecorporation to sell the property to San Juan.Sec. 40. Sale or other disposition of assets. Subject to the provisions ofexisting laws on illegal combination and monopolies, a corporation may bya majority vote of its board of directors . . . sell, lease, exchange,mortgage, pledge or otherwise dispose of all or substantially all of itsproperty and assets including its goodwill . . . when authorized by the voteof the stockholders representing at least two third (2/3) of theoutstanding capital stock


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On March 18, 1997, the CA modified the decision of theRTC by ordering Nenita Lee Gutenberg to refund orreturn to San Juan the downpayment.


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1. Whether or not there a valid contract of sale betweenpetitioner and Motorich?

2. Whether or not the doctrine of piercing the veil ofcorporate fiction be applied to Motorich?

ISSUES:


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1. No. A corporation is a juridical person separate and distinctfrom its stockholders or members. Accordingly, the property ofthe corporation is not the property of its stockholders ormembers and may not be sold by the stockholders or memberswithout express authorization from the corporation's board ofdirectors. Section 23 of BP 68, otherwise known as theCorporation Code of the Philippines, provides: Sec. 23. The Board of Directors or Trustees. Unless otherwise

provided in this Code, the corporate powers of all corporations

formed under this Code shall be exercised, all business conductedand all property of such corporations controlled and held by the

board of directors or trustees to be elected from among the holders

of stocks, or where there is no stock, from among the members of

the corporation, who shall hold office for one (1) year and until their

successors are elected and qualified.

HELD:


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Furthermore, the Court has also recognized the rulethat "persons dealing with an assumed agent, whetherthe assumed agency be a general or special one boundat their peril, if they would hold the principal liable, toascertain not only the fact of agency but also thenature and extent of authority, and in case either iscontroverted, the burden of proof is upon them toestablish it (Harry Keeler v. Rodriguez, 4 Phil. 19).

Unless duly authorized, a treasurer, whose powers arelimited, cannot bind the corporation in a sale of itsassets.


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Petitioner further contends that Respondent Motorich hasratified said contract of sale because of its "acceptance ofbenefits," as evidenced by the receipt issued byRespondent Gruenberg.

As a general rule, the acts of corporate officers within thescope of their authority are binding on the corporation. Butwhen these officers exceed their authority, their actions"cannot bind the corporation, unless it has ratified suchacts or is estopped from disclaiming them.

There is a clear absence of proof that Motorich everauthorized Nenita Gruenberg, or made it appear to anythird person that she had the authority, to sell its land or toreceive the earnest money.


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No. Petitioners argument that the veil of corporatefiction of Motorich should be pierced because the latteris a close corporation since spouses Reynaldo andNenita owned 99.866% of the subscribed capital stockof the corporation thus Nenita needed no authorizationfrom the board to enter into the subject contract cannotbe merited.

The corporate fiction can be set aside only when itbecomes a shield against liability for fraud, illegality orinequity committed on third persons. The question ofpiercing the veil of corporate fiction is then a matter ofproof.


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In the present case, however, petitioner utterly failedto establish that said corporation was formed, or that i tis operated, for the purpose of shielding any allegedfraudulent or illegal activities of its officers orstockholders; or that the said veil was used to concealfraud, illegality or inequity at the expense of thirdpersons like petitioner.

SC also ruled that Motorich is not a close corporation.Section 96 of the Corporation Code defines a closecorporation as follows:


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The articles of incorporation of Motorich SalesCorporation does not contain any provision stating that(1) the number of stockholders shall not exceed 20, or(2) a preemption of shares is restricted in favor of anystockholder or of the corporation, or (3) listing itsstocks in any stock exchange or making a publicoffering of such stocks is prohibited.

Plaintiff should have been on the look out under thesecircumstances. More so, plaintiff himself own severalcorporations which makes him knowledgeable oncorporation matters.

WHEREFORE, the petition is hereby DENIED and theassailed Decision is AFFIRMED.

san juan vs. ca case digest

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