Case Digest (G.R. No. 142936)
Facts:
Philippine National Bank & National Sugar Development Corporation v. Andrada Electric & Engineering Company, G.R. No. 142936, April 17, 2002, the Supreme Court Third Division, Panganiban, J., writing for the Court.The respondent, Andrada Electric & Engineering Company (plaintiff in the trial court), performed electrical construction, repair and supply work for Pampanga Sugar Mills (PASUMIL) pursuant to a contract dated October 29, 1971 and other extra works, which resulted in an outstanding balance allegedly owed by PASUMIL of P513,263.80 (after partial payments totaling P264,000). The respondent sued PASUMIL and also joined Philippine National Bank (PNB) and National Sugar Development Corporation (NASUDECO) as defendants, alleging that PNB and NASUDECO owned and possessed PASUMIL’s assets and therefore should be held jointly and severally liable.
Facts developed that the Development Bank of the Philippines (DBP) foreclosed PASUMIL’s mortgaged assets and acquired them as highest bidder at public auction. Pursuant to Letter(s) of Instruction (LOI No. 189‑A as amended by LOI No. 311), PNB redeemed and acquired the foreclosed PASUMIL assets under a Redemption Agreement and later conveyed the rights under that redemption to NASUDECO by Deed of Assignment; PNB also organized NASUDECO to manage certain sugar assets. PNB and NASUDECO contended they had no privity of contract with respondent, that they never expressly or impliedly assumed PASUMIL’s debts, and that PASUMIL’s corporate existence had not been legally extinguished.
Summons by publication resulted in PASUMIL’s default. The Regional Trial Court (Judge Ernesto S. Tengco) rendered judgment on September 4, 1986 ordering PNB, NASUDECO and PASUMIL jointly and severally to pay P513,623.80 plus 14% interest, attorneys’ fees and costs. The Court of Appeals, in CA‑GR CV No. 57610 (Decision dated April 17, 2000), affirmed the trial court, holding it offensive to justice for a corporation to take over and operate another’s business while repudiating responsibility for obligations. Petitioners brought the case to the Supreme Court by a Petition for Review under Rule 45, arguing that the CA erred in holding PNB/NA...(Subscriber-Only)
Issues:
- Whether petitioners may be held liable for PASUMIL’s unpaid corporate debts despite PASUMIL’s corporate existence not having been legally extinguished.
- Whether the corporate veil should be pierced—i.e., whether the exceptions to non‑liability for a purchaser of assets (assumption of debt, merger/consolidation, mere continuation, or fraudulent...(Subscriber-Only)
Ruling:
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Ratio:
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Doctrine:
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