G.R. No. 91889 - Manuel R. Dulay Enterprises, Inc. vs. Court of Appeals

Case Summary (G.R. No. 91889)

Procedural Background

Petitioners sought annulment in three RTC cases—No. 2880-P (annulment of MTC ejectment decision), No. 8278-P (title cancellation), and No. 8198-P (recovery of possession, rentals, damages). The RTC dismissed the annulment and cancellation actions and granted respondent’s recovery claim with awards of possession, accounting of rentals, and litigation costs. The Court of Appeals affirmed on October 23, 1989, and denied reconsideration on January 26, 1990. A petition for certiorari followed.

Corporate Resolution and Property Sale

On December 23, 1976, by Board Resolution No. 18, the corporation sold the Dulay Apartment property to the Velosos for ₱300,000. The sale deed was executed by President Manuel R. Dulay, TCT No. 17880 was cancelled, and TCT No. 23225 issued to Maria Theresa V. Veloso. A December 9, 1977 memorandum granted a two-year repurchase option for ₱200,000, but it remained unannotated on title.

Mortgage, Foreclosure, and Title Consolidation

On December 24, 1976, Veloso mortgaged the property to Torres for ₱250,000, annotated on TCT No. 23225. Veloso’s nonpayment led to an extrajudicial foreclosure on April 5, 1978, where Torres emerged as highest bidder. After the one-year redemption period lapsed, Torres filed an affidavit of consolidation of ownership, resulting in issuance of TCT No. 24799 on April 23, 1979.

Related Ejectment and Cancellation Actions

Torres filed for possession against Veloso and Dulay in LRC No. 1742-P; the petition was dismissed. On June 20, 1980, Torres and Pabalan sued the corporation, Virgilio Dulay, and Redovan for possession, rents, and damages (Civ. Ct. No. 8198-P). On July 21, 1980, the corporation filed Civ. Ct. No. 8278-P to cancel the sheriff’s sale and TCT No. 24799. A separate ejectment in MTC No. 38-81 led to Civ. Ct. No. 2880-P for annulment of that decision.

Trial Court Findings

The RTC held that the corporate sale was valid, that the unannotated repurchase memorandum was ineffective, and that Torres’s foreclosure title was lawful. It found Virgilio Dulay’s failure to object ratified the board resolution. It ordered surrender of possession, accounting of rentals, indemnity for litigation expenses, and payment of attorney’s fees; counterclaims were dismissed.

Court of Appeals Ruling

The Court of Appeals affirmed all RTC findings, ruling no grave abuse of discretion occurred. It upheld application of piercing the corporate veil to bind the corporation for Dulay’s acts and validated Torres’s foreclosure title. The motion for reconsideration was denied, cementing the adverse judgment.

Application of Corporation Code Section 101

As a close corporation, board actions without formal meeting are valid if no director timely objects in writing. Virgilio Dulay’s knowledge of and acquiescence in the sale ratified the resolution. Hence, procedural irregularities did not invalidate the corporate sale.

Piercing the Corporate Veil

The Court reiterated that corporate separateness yields to prevent fraud, defeat pub