Case Digest (G.R. No. 117416)
Facts:
Avelina G. Ramoso, Renato B. Salvatierra, Benefrido M. Cruz, Leticia L. Medina, Pelagio Pascual, Domingo P. Santiago, Amado S. Veloira, Concepcion F. Blaylock, in Their Own Behalf and in Behalf of Numerous Other Persons Similarly Situated, Commercial Credit Corp. of North Manila, Commercial Credit Corp. of Cagayan Valley, Commercial Credit Corp. of Olongapo City, and Commercial Credit Corp. of Quezon City v. Court of Appeals, General Credit Corp., et al., G.R. No. 117416, December 08, 2000, Supreme Court Second Division, Quisumbing, J., writing for the Court.In 1957 Commercial Credit Corporation (CCC) was organized as a general financing and investment corporation. CCC solicited investors to form local franchise companies (e.g., Commercial Credit Corporation — Cagayan Valley; — Olongapo City; — Quezon City). Petitioners subscribed majority shares in those franchise corporations while CCC retained minority holdings. Management contracts placed day‑to‑day control in CCC’s resident manager, set a 10% management fee on net profits, placed most operating expenses on the franchise companies, allowed CCC to set discounting rates, and required investors to execute continuing guarantees for bad accounts arising from discounting activities.
In the 1970s, CCC sought a quasi‑banking license but was impeded by Central Bank DOSRI limits (citing Sec. 1326 of the Central Bank Manual). CCC divested shareholdings and created CCC Equity to administer the franchise companies under new management contracts; CCC continued to provide a discounting line through CCC Equity and later changed its corporate name to General Credit Corporation (GCC). Operations continued until adverse media reports in 1981 revealed alleged anomalies: dissipation of franchise assets, assignment of uncollectible accounts, spurious commercial papers, improper release of collateral, and a questionable offset arrangement with Resource and Finance Corporation (RFC).
On February 24, 1984, petitioners filed a complaint with the Securities and Exchange Commission (SEC) seeking receivership, an order that GCC and CCC Equity pay depositors/investors for losses, and nullification of the GCC–RFC agreement. Respondents moved to dismiss for lack of SEC jurisdiction and for failure to plead proper parties; the hearing officer denied dismissal and later (in a decision dated February 23, 1990) ordered that GCC, CCC Equity and the franchise companies be treated as one corporation (piercing the corporate veil), absolved the franchise companies and individual petitioners from liability on bad accounts, and declared GCC not liable to individual investors for their investments; the petition was dismissed as to RFC and certain individuals.
The SEC en banc, in an October 6, 1992 decision, reversed the hearing officer, holding that piercing the corporate veil was not justified and that declarations absolving franchise corporations and individual petitioners of liability were beyond the hearing officer’s jurisdiction. Petitioners appealed to the Court of Appeals, which affirmed the SEC decision on October 8, 1993; a motion for reconsideration was denied on September 22, 1994. Petitioners then filed this ...(Pro-only)
Issues:
- Did the Court of Appeals err in failing to rule that GCC’s alleged fraud and mismanagement warranted piercing the corporate veil of GCC, CCC Equity and the franchise companies?
- Did the Court of Appeals err in failing to rule that only the SEC has jurisdiction to determine whether the individual petitioners may be held liable on the continuing guaranties for bad accounts incurred through the discounting process?
- Did the Court of Appeals err in failing to reverse and set asi...(Pro-only)
Ruling:
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Ratio:
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Doctrine:
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