Eo-Bote vs. Alvarez

G.R. No. 223572
SBMA sued CAIR and stockholders for unpaid rentals; SC ruled only CAIR liable, dismissing claims against stockholders and Alvarez, citing lack of insolvency proof and inapplicability of trust fund doctrine.
stockholders trust fund doctrine separate legal personality

Facts:

Jennifer M. Enano-Bote, Virgilio A. Bote, Jaime M. Matibag, Wilfredo L. Pimentel, Teresita M. Enano v. Jose Ch. Alvarez, Centennial Air, Inc. and Subic Bay Metropolitan Authority, G.R. No. 223572, November 10, 2020, Supreme Court First Division, Caguioa, J., writing for the Court.

In February 1999 the Subic Bay Metropolitan Authority (SBMA) and Centennial Air, Inc. (CAIR) entered into a five‑year lease for Building 8324 at Subic Bay International Airport. The lease set monthly rent in U.S. dollars and imposed a 24% penalty on overdue amounts; SBMA retained the right to seek judicial recovery of unpaid sums, costs and attorney’s fees. CAIR became delinquent; SBMA’s records and demand letters show arrears increasing from P119,324.51 (Oct. 31, 1999) to US$168,405.84 (Dec. 31, 2002). CAIR proposed a payment scheme and made an initial payment but failed to deliver post‑dated checks or otherwise fully comply; SBMA sent a final demand and purportedly terminated the lease on January 14, 2004.

SBMA filed a complaint against CAIR and various named incorporators/stockholders (the present petitioners) for US$163,341.89 (plus interest), exemplary damages and attorney’s fees. Summonses were served on CAIR, its corporate representative Roberto Lozada, the individual stockholder‑defendants and others. Defendants denied liability and alleged that by a Deed of Assignment of Subscription Rights (DASR) dated December 1, 1998 they had transferred their subscriptions to Jose Ch. Alvarez, who became CAIR’s president and majority stockholder; petitioners argued they were no longer stockholders when the lease was executed and therefore could not be held personally liable.

At the Regional Trial Court (RTC), CAIR was initially declared in default but later allowed to adopt the answer of Lozada; SBMA presented two witnesses (accounting and registration officers) to prove CAIR’s arrears. Petitioners filed a third‑party complaint against Alvarez; Alvarez repeatedly failed to present evidence and was deemed to have waived the right to present testimony. CAIR did not present other evidence. The RTC denied CAIR’s demurrer to evidence and, on April 8, 2014, rendered judgment ordering CAIR and the individual defendants (including petitioners) jointly and severally to pay SBMA US$163,341.89 with legal interest; it also ordered Alvarez to reimburse the individual defendants the same amount and awarded moral damages and attorney’s fees to one petitioner; the case against Lozada was dismissed.

Petitioners appealed to the Court of Appeals (CA‑G.R. CV No. 103619). The Court of Appeals, Second Division, in a Decision dated September 21, 2015 affirmed the RTC judgment, invoking the trust fund doctrine as articulated in Halley v. Printwell, Inc. Petitioners’ motion for reconsideration...(Pro-only)

Issues:

  • Did the Court of Appeals err in applying the trust fund doctrine to hold the petitioners personally and solidarily liable for CAIR’s unpaid rentals?
  • Under the third‑party complaint, should Jose Ch. Alvarez be held independently liable to pay Jennifer and Virgilio moral damages of P300,000 and attorney’s fees of P200,000, respecti...(Pro-only)

Ruling:

  • (Pro-only)

Ratio:

  • (Pro-only)

Doctrine:

  • (Pro-only)
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