Case Summary (G.R. No. 162540)
Procedural Background
SBMA filed before the RTC a collection suit against CAIR and its stockholders for unpaid rentals and airport fees totaling US$163,341.89 plus interest, exemplary damages and attorney’s fees. Petitioners denied liability, asserting they had divested their subscriptions to CAIR stock through the DASR in favor of Alvarez prior to the lease. A third-party complaint was later filed by petitioners against Alvarez seeking indemnity.
Facts of the Lease and Nonpayment
Under the five-year lease, CAIR agreed to pay US$2.50 per sqm monthly or US$4,757.50, plus airport facility fees and a 24% penalty on overdue amounts. CAIR defaulted repeatedly. SBMA issued demand letters from 1999 through final demand in January 2004, then terminated the lease and sought judicial recovery of unpaid rentals, penalties, costs and fees.
Share Assignment and Alleged Divestment
On December 1, 1998, petitioners purportedly assigned their aggregate 400,000-share subscription (100% of CAIR capital stock) to Alvarez, who was to assume the remaining P30 million subscription balance and reassign nominal shares (76,000 to Jennifer; 4,000 to Virgilio). Petitioners contended that, having divested their interests, they could not be held liable for CAIR’s subsequent obligations.
Trial Court Ruling
The RTC applied the trust fund doctrine, concluding that CAIR’s assets, including unpaid subscriptions, were a trust fund for creditors. It held CAIR and petitioners jointly and severally liable for US$163,341.89 plus interest. Alvarez was ordered to reimburse petitioners and to pay them moral damages and attorney’s fees. The case against Lozada was dismissed.
Court of Appeals Ruling
The CA affirmed the RTC’s judgment, finding that petitioners remained stockholders when the lease was executed because their share transfer was not recorded in CAIR’s books as required under Section 63 of the Corporation Code. The trust fund doctrine was applied to reach unpaid subscriptions.
Issue: Application of the Trust Fund Doctrine
The central issue was whether the trust fund doctrine could be invoked to hold petitioners personally liable for CAIR’s unpaid rentals by virtue of their unpaid subscriptions.
Legal Principles on the Trust Fund Doctrine
• Originating in Wood v. Dummer and adopted in Philippine Trust Co. v. Rivera, the doctrine treats corporate assets as a trust fund for creditors only in limited circumstances:
- Insolvency or winding up without provision for creditors;
- Fraudulent distribution of corporate property among shareholders to prejudice creditors;
- Release of subscribers from subscription obligations without valuable consideration to the prejudice of creditors;
- Preferential treatment of certain creditors by an insolvent corporation.
• Mere unpaid corporate obligations, without proof of insolvency, dissolution or fraud, do not trigger the doctrine.
• A valid share transfer requires delivery, endorsement of the certificate and recording in corporate books (Section 63, Corporation Code).
Supreme Court’s Analysis
- SBMA’s complaint sought only collection of unpaid rent; it neither alleged nor proved CAIR’s insolvency, dissolution, fraudulent distribution or release of subscription obligations.
- Evidence presented by SBMA established only the existence and amount of ren
Case Syllabus (G.R. No. 162540)
Facts
- On February 3, 1999, SBMA leased Building 8324 at Subic Bay International Airport to Centennial Air, Inc. (CAIR), represented by Roberto Lozada, for five years (February 1, 1999–January 31, 2004).
- Monthly rent: US$2.50 per square meter or US$4,757.50 (or peso equivalent), plus facility fees; 24% interest on any overdue amount; SBMA authorized to collect damages, penalties, costs, attorney’s fees.
- CAIR defaulted repeatedly. As of October 31, 1999, arrears reached ₱119,324.51; by December 31, 2002, ₱168,405.84.
- CAIR proposed to pay US$33,682 down, deliver 18 post-dated checks for US$134,723.84, and resume current rent. Only the down payment was made; checks never delivered.
- SBMA issued repeated demands (letters of November 9, 1999; February 7, 2003); on January 14, 2004 issued final demand, terminated lease, ordered CAIR to vacate.
- SBMA sued CAIR, Lozada, and CAIR’s stockholders (Jennifer Enano-Bote, Virgilio Bote, Amelita Simon, Teresita Enano, Jaime Matibag, Wilfredo Pimentel, Vicente Suazo), seeking US$163,341.89 plus interest, ₱100,000 exemplary damages, ₱20,000 attorney’s fees.
- Petitioners denied liability, claiming they had assigned their entire subscription rights (400,000 shares) to Alvarez on December 1, 1998, leaving only Jennifer and Virgilio as nominal shareholders with fully paid shares.
Procedural Posture
- RTC Branch 72, Olongapo City: CAIR defaulted, later allowed to answer; SBMA’s evidence proved rental arrears; petitioners filed third-party complaint against Alvarez.
- RTC Decision (April 8, 2014): held CAIR and petitioners jointly and severally liable for US$163,341.89 + legal interest; ordered Alvarez to reimburse petitioners and award petitioners moral damages (₱300,000) and attorney’s fees (₱200,000); dismissed Lozada.
- CA Decision (September 21, 2015