G.R. No. 129459 - San Juan Structural and Steel Fabricators, Inc. vs. Court of Appeals

Case Summary (G.R. No. 129459)

Factual Background

On February 14, 1989, MOTORICH SALES CORPORATION, through a document signed by its treasurer, NENITA LEE GRUENBERG, purportedly agreed to sell Lot 30, Block 1, Acropolis Greens Subdivision (414 square meters) to SAN JUAN STRUCTURAL AND STEEL FABRICATORS, INC., represented by its president, Andres T. Co, at P5,200 per square meter. The Agreement provided for an earnest money payment of P100,000 and the balance payable on or before March 2, 1989, and stipulated that upon full payment the transferor would execute a Transfer of Rights/Deed of Assignment. Petitioner paid an earnest P100,000 and presented a Metrobank cashiers check for the balance on March 2, 1989, but the transfer documents were not executed and the sale did not proceed. The title history showed prior dealings among JNM Realty & Development Corp., ACL Development Corp., and Motorich, and a new title was later issued in the name of Motorich represented by Reynaldo L. Gruenberg and Nenita Gruenberg under Transfer Certificate of Title No. 3571.

Procedural History

Petitioner filed suit in the RTC, alleging breach for failure to execute the Transfer of Rights/Deed of Assignment and claiming moral, exemplary, and consequential damages and attorney’s fees. Defendants answered, denying that Motorich authorized Gruenberg to bind the corporation and averring that payment arrangements had not been complied with. The RTC dismissed both the complaint and the counterclaim, finding no proof of authorization. The Court of Appeals affirmed the RTC’s dismissal but modified the judgment to order Nenita Lee Gruenberg to refund P100,000 to petitioner. The CA denied reconsideration. Petitioner then filed the present Petition for Review on Certiorari to the Supreme Court.

Issues Presented

The Supreme Court distilled the contested points into four principal questions: whether a valid and enforceable contract of sale existed between petitioner and Motorich; whether the corporate veil of Motorich should be pierced to bind the corporation by the acts of its controlling stockholder; whether an alleged alteration in the transcript of stenographic notes (TSN) materially affected the disposition; and whether respondents were liable for damages and attorney’s fees.

Parties’ Contentions

Petitioner maintained that the Agreement of February 14, 1989 was binding on Motorich because Gruenberg and Co signed it and thus manifested consent to be bound; petitioner further argued that Motorich ratified the transaction by accepting benefits, and that Motorich was effectively a close corporation dominated by spouses Reynaldo and Nenita Gruenberg, so board action was unnecessary. Petitioner also alleged that the TSN was altered to its prejudice and sought damages and attorney’s fees for alleged bad faith. Respondents countered that Gruenberg acted without authorization, that her signature as treasurer was insufficient to bind Motorich in the sale of corporate realty, and that petitioner failed to prove either actual authority or ratification; Gruenberg also offered to return the earnest money.

Trial and Appellate Findings

The RTC found no evidence that NENITA LEE GRUENBERG was authorized by MOTORICH SALES CORPORATION to dispose of the corporate land and held that disposition of corporate assets required compliance with Section 40 of the Corporation Code. The RTC dismissed the complaint and counterclaim. The Court of Appeals affirmed these factual findings but ordered Gruenberg to refund the P100,000 earnest payment to petitioner. The CA expressly found that petitioner failed to prove authorization, that the handwritten receipt signed by Gruenberg did not establish corporate ratification, and that Motorich’s articles did not show it to be a close corporation under Section 96.

The Supreme Court’s Analysis on Contract Validity

The Court held that the Agreement could not bind Motorich because it never authorized nor ratified Gruenberg’s purported sale. The Court reiterated the rule that a corporation acts through its board of directors unless specific authority to an officer is shown, citing Section 23 of BP 68 and established agency principles. The Court placed the burden on petitioner to prove Gruenberg’s authority and found that petitioner’s offer of evidence contained no board resolution, bylaw provision, or other proof of actual or apparent authority. The Court noted that selling corporate realty plainly exceeded the ordinary functions of a treasurer and invoked Article 1874 and Article 1878 requiring written authority for sales of immovables through an agent. Because consent of the seller was not shown, the Court concluded that no perfected contract of sale existed and that the Agreement was void under Article 1874 and could not be ratified.

The Supreme Court’s Analysis on Piercing the Corporate Veil

The Court rejected petitioner’s late-raised plea to pierce the corporate veil. Procedurally, petitioner introduced the close corporation argument only on appeal, and the Court declined to consider points not raised in the trial court. Substantively, the Court held that near-total ownership by spouses Reynaldo and Nenita Gruenberg did not suffice to disregard Motorich’s separate corporate personality. The Court applied Section 96 of the Corporation Code and held Motorich’s articles of incorporation lacked the requisites of a close corporation. The Court emphasized that the veil may be pierced only upon proof that the corporate form was used to perpetrate fraud, illegality, or inequity, and found no such evidence here. The Court further observed that, even if the veil were set aside, the property would be conjugal or community property of the spouses and could not validly be alienated by one spouse without the other’s consent or court authority.

The Supreme Court’s Findings on the

Case Syllabus (G.R. No. 129459)

Parties and Procedural Posture

San Juan Structural and Steel Fabricators, Inc. (Petitioner) sued Motorich Sales Corporation (Respondent), Nenita Lee Gruenberg (Respondent), ACL Development Corp. (Respondent), and JNM Realty and Development Corp. (Respondent) for specific performance and damages arising from an alleged sale of land.
The Regional Trial Court of Makati, Branch 63 dismissed both the Complaint and the Counterclaim for lack of merit.
The Court of Appeals modified the RTC decision by ordering Nenita Lee Gruenberg to refund P100,000.00 to petitioner and otherwise affirmed.
Petitioner filed a Petition for Review on Certiorari assailing the Court of Appeals Decision and the denial of reconsideration.

Key Factual Allegations

The parties executed an Agreement dated February 14, 1989, in which Motorich Sales Corporation, purportedly represented by its treasurer Nenita Lee Gruenberg, agreed to sell Lot 30, Block 1, Acropolis Greens Subdivision, containing 414 square meters, at P5,200.00 per square meter.
The Agreement provided for payment of earnest money of P100,000.00 upon execution and balance payable on or before March 2, 1989, with a promise to execute a Transfer of Rights/Deed of Assignment upon full payment.
San Juan Structural allegedly delivered a Metrobank cashier's check for the balance but claimed that Gruenberg failed to appear to effect the transfer and later refused to execute the deed.
ACL Development Corp. and JNM Realty & Development Corp. were impleaded as necessary parties because title transfers in the chain of ownership were relevant to the dispute.
Petitioner alleged moral, exemplary, and other damages totaling various sums including P500,000.00 for moral and nominal damages and several P100,000.00 items for exemplary damages, loss of opportunity, and attorneys' fees.

Procedural History

The RTC found no evidence that Gruenberg was authorized by Motorich to dispose of corporate real property and dismissed the complaint and counterclaim.
On appeal, the Court of Appeals affirmed the RTC but modified the judgment to order Gruenberg to refund the P100,000.00 earnest money.
Petitioner elevated the case to this Court by Petition for Review on Certiorari and sought reconsideration of the CA Resolution denying reconsideration.

Issues Presented

Whether a valid and enforceable contract of sale existed between petitioner and Motorich Sales Corporation.
Whether the doctrine of piercing the corporate veil applied to Motorich to bind the corporation by acts of Nenita Lee Gruenberg.
Whether the alleged alteration of Gruenberg’s testimony in the transcript of stenographic notes was material to disposition.
Whether respondents were liable for damages and attorneys' fees.

Holding

The Court denied the petition and affirmed the Court of Appeals Decision with the modification ordering Nenita Lee Gruenberg to refund P100,000.00 to petitioner.
The Court held that no valid contract of sale bound Motorich Sales Corporation because Gruenberg lacked authority to sell corporate real property and the requisite corporate authorization was not proved.
The Court held that the corporate veil of Motorich could not be pierced on the facts presented and that the close co