Case Summary (G.R. No. 191525)
Court of Appeals Ruling
The CA found grave abuse of corporate form by Santos, who:
- Executed an “absolute sale” in 1979 as I/AME’s President despite the corporation’s 1985 incorporation;
- Transferred the property to I/AME while the revival appeal was pending; and
- Secured title issuance in 1993, years after the supposed sale.
Accordingly, the CA pierced I/AME’s corporate veil to enforce Santos’s judgment debt on the Makati property.
Issue
Whether I/AME’s right to due process was violated when its corporate veil was pierced and its property levied to satisfy Santos’s debt.
No Due Process Violation
The Court held that piercing the corporate veil implicates factual determinations not reviewable under Rule 45 unless there is a clear misapprehension of evidence. Because the CA’s and RTC’s factual findings were supported by record evidence, I/AME cannot raise a due process objection merely because it was not impleaded in the underlying action.
Doctrine of Corporate Veil Piercing
Under the 1987 Constitution and established jurisprudence, a corporation’s separate personality yields to equitable limitations when used to perpetrate fraud or evade existing obligations. Piercing is warranted if the corporate form is a sham, alter ego, or conduit for fraudulent, unfair, or illegal purposes.
Applicability to Non-Stock Corporations
The Court affirmed that non-stock, non-profit corporations are not immune from veil piercing. Equitable principles allow courts to scrutinize any juridical entity, regardless of stock structure, when its form is subverted to shield wrongful acts.
Applicability to Natural Persons
Corporate veil piercing extends to natural persons who use a corporation as their alter ego. Jurisprudence permits disregarding corporate distinctiveness when an individual incorporates or controls an entity to evade personal liabilities. Santos’s role as I/AME’s conceptualizer, majority funder, president (even before incorporation), and his own admissions established alter-ego status.
Reverse Piercing of Corporate Veil
The Court applied the doctrine of outsider revers
...continue readingCase Syllabus (G.R. No. 191525)
Facts
- Atty. Emmanuel T. Santos leased two buildings (A.I.D. Building and Litton Apartments) from Litton and incurred rental arrears and unpaid realty taxes.
- Litton filed an unlawful detainer complaint before the MeTC of Manila; the MeTC ordered Santos to vacate the premises and to pay arrears, realty taxes, penalties, and attorney’s fees.
- The MeTC judgment was not executed; Litton secured a revival of judgment from the RTC.
- Santos appealed to the CA, which affirmed the RTC; the CA decision became final and executory on 22 March 1994.
- On 11 November 1996, the MeTC sheriff levied on property covered by TCT No. 187565 in the name of I/AME, but annotated “only up to the extent of the share of Emmanuel T. Santos.”
- I/AME moved to remove the annotations, claiming a separate corporate personality from Santos; the MeTC initially denied, then—on reconsideration—granted the motion, canceling the annotations and writ of execution.
- Litton appealed to the RTC, which reversed the MeTC’s reconsideration order and reinstated its original order; the CA subsequently denied I/AME’s petition, affirming the trial courts.
Procedural History
- MeTC Decision (2 March 1983): ruled for Litton in unlawful detainer.
- RTC Decision (13 September 1989): granted revival of judgment.
- CA Decision (21 February 1994): affirmed RTC; became final and executory 22 March 1994.
- MeTC Order (29 October 2004): denied I/AME’s initial motion; reconsideration order later granted then reversed by RTC.
- CA Decision (30 October 2009) and Resolution (12 March 2010): denied I/AME’s petition.
- SC Petition for review on certiorari under Rule 45.
Issue
- Whether the corporate veil of I/AME was pierced in violation of its right to due process when its property was subjected to