G.R. No. 135929 - Limson vs. Court of Appeals

The Park Rite Co., Inc. was organized on or about April 15, 1947, with a capital stock of 1,500 shares at P1.00 per share.
The original incorporators included M. McConnel, W.P. Cochrane, Ricardo Rodriguez, Benedicto M. Dario, and Aurea Orfrecio—with McConnel and Cochrane each owning 500 shares, Rodriguez 498 shares, and Dario and Orfrecio 1 share each. The shares of Dario and Orfrecio were deemed merely qualifying shares.

On or about August 22, 1947, defendants Cirilo Paredes and Ursula Tolentino purchased 1,496 shares, effectively gaining control of the corporation.
The remaining shares were acquired by Bienvenido J. Claudio, Quintin C. Paredes, Segundo Tarictican, and Paulino Marquez, which were also considered merely qualifying shares, reinforcing that the corporation was, in effect, dominated by Cirilo Paredes and Ursula Tolentino.

The corporation leased a vacant lot on Juan Luna Street (Manila) from Rafael Perez Rosales y Samanillo, which was used as a parking area for motor vehicles in exchange for consideration.
It was later discovered that the corporation also occupied and used an adjacent lot belonging to respondents-appellees Dominga de los Reyes and Sabino Padilla without their knowledge or consent.

The lot owners (respondents) discovered the unauthorized occupation around October 1947 and demanded rental payments for the use of their property.
A complaint for forcible entry was filed on October 7, 1947, in the Municipal Court of Manila (Civ. Case No. 4031). A judgment rendered on November 13, 1947, ordered Park Rite Co., Inc. to pay P7,410.00 plus legal interest for damages from April 15 to October 15, 1947, and P1,235.00 per month from October 15, 1947 until the lot's return, ultimately amounting to P11,732.50.

Upon execution of the judgment, the corporation was found to possess only P550.00 in court deposits, leaving an unpaid balance of P11,182.50.
In a subsequent suit filed in the Court of First Instance of Manila, judgment creditors sought to hold both the corporation and its past and present stockholders jointly and severally liable for the outstanding amount along with legal interest and costs.
Although the Court of First Instance initially denied recovery, the Court of Appeals reversed this decision, holding that the corporation was a mere alter ego or business conduit of the principal stockholders and thereby ordering them personally liable.

The corporation's offices were located in the same building, on the same floor, and in the same room as those of Cirilo Paredes, indicating no separation between the personal and corporate functions.
The corporate funds were maintained in the name of Cirilo Paredes, further establishing that the corporation had no independent financial existence apart from its controlling stockholders.
Other corporate assets were minimal or nominal (e.g., toll house, wire fence around the lot, signage), underscoring the scarcity of independent corporate assets to satisfy the judgment.

Whether the separate legal personality of a corporation can be disregarded, causing its controlling stockholders to be held personally liable for the corporation’s obligations.

Whether the corporate entity, when used as an alter ego or mere instrumentality for the benefit of its principal stockholders, should have its separate existence set aside in order to prevent injustice and protect the rights of third parties.

Whether the method of enforcement under the Rules of Court (i.e., the five-year enforcement period and the motion for judgment credit) is applicable in a suit that seeks to hold non-parties to the original judgment (i.e., the individual stockholders) responsible for satisfying the corporate judgment.