Case Summary (G.R. No. 150283)
Key Dates and Applicable Law
Key operational dates: corporation organized in 1983; Memorandum of Agreement in 1987; counsel’s letter dated October 30, 1991; replevin filed January 15, 1992.
Applicable law and sources relied upon by the Court: 1987 Philippine Constitution (applicable as decision date is post-1990), Corporation Code (Section 23 cited), Civil Code provisions on contracts and conditional obligations (Arts. 1181, 1318, 1319), trust-fund doctrine jurisprudence, and relevant Supreme Court and appellate precedents cited in the decision.
Factual Findings Relevant to Dispute
The parties agree that the machineries and equipment in dispute were contributed by Yamamoto as part of his investment in the corporation. Atty. Doce’s letter set out that Yamamoto “may take them out with you … provided the value of such machines is deducted from your and Wako’s capital contributions, which will be paid to you,” and asked for Yamamoto’s “comments … soonest.” Yamamoto attempted removal but was blocked by respondents; he then filed a replevin action. The trial court ruled for Yamamoto; the Court of Appeals reversed, holding the machines were corporate property and could not be retrieved without board authority; the Supreme Court reviewed the appeal.
Procedural Posture and Relief Sought
Trial court (RTC) granted replevin, declared Yamamoto owner/possessor of the machineries, made the writ permanent, awarded attorney’s fees and costs, and dismissed respondents’ counterclaims. On appeal the Court of Appeals reversed, finding the machineries to be corporate property and denying Yamamoto’s reliance on doctrines invoked. Yamamoto’s petition to the Supreme Court challenged three principal rulings: (A) refusal to pierce the corporate veil; (B) rejection of promissory estoppel; and (C) denial of attorney’s fees in favor of petitioner.
Legal Issue: Authority to Bind the Corporation
The central legal question was whether Atty. Doce’s letter and the representations therein bound NLII such that Yamamoto could remove the machineries without corporate authorization. The Court applied the Corporation Code principle that corporate powers are, unless otherwise provided, exercised by the board of directors (citing Section 23). Absent a board resolution authorizing Nishino or anyone else to bind the corporation regarding the removal of capital assets, an individual stockholder or officer cannot unilaterally alter the corporation’s title to or disposition of corporate property.
Corporate Veil and “Alter Ego” Analysis
Yamamoto urged piercing the corporate veil on the ground that NLII was an instrumentality or alter ego of the Nishinos. The Court reiterated the established three-part test for piercing the corporate veil: (1) complete domination of finances, policy, and business practice to the extent the corporation had no separate mind or will regarding the transaction attacked; (2) such control was used to commit fraud, perpetuate a violation of a legal duty, or engage in dishonest and unjust acts contrary to the plaintiff’s rights; and (3) the control and breach of duty proximately caused the injury or loss complained of. The Court emphasized that mere majority or near-total stock ownership is insufficient; the plaintiff must clearly and convincingly prove the use of control to commit wrongdoing. Applying these standards, the Court found no convincing demonstration that Nishino used NLII’s separate personality to perpetrate a wrong against Yamamoto; therefore the corporate veil was not pierced.
Promissory Estoppel and Offer–Acceptance Analysis
Regarding promissory estoppel, the Court analyzed paragraph 12 of the counsel’s letter and noted the language asking for Yamamoto’s “comments … soonest.” The Court characterized the communication as an offer, not a binding promise, because it required Yamamoto’s acceptance and arguably imposed a condition (deduction of machine value from his capital contribution). Under Civil Code principles on contracts (Arts. 1318–1319) and on conditional obligations (Art. 1181), a mere offer produces no obligation until accepted and, if conditional, the condition must occur for rights to vest. Yamamoto’s assertion that he agreed to the condition was not proven. Consequently, promissory estop
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Procedural Posture
- Petition for review to the Supreme Court from the Court of Appeals decision (Decision of May 30, 2001) reversing the Regional Trial Court, Branch 45, Makati (Decision of June 9, 1995).
- RTC rendered judgment in favor of petitioner Ryuichi Yamamoto declaring him owner and possessor of certain machineries and making permanent the writ of replevin; awarded attorney’s fees of P50,000; dismissed counterclaims; ordered defendants to pay costs.
- Court of Appeals reversed the RTC, held the machineries and equipment to be corporate property of Nishino Leather Industries, Inc. (NLII), and dismissed the complaint; found no ground supporting respondents’ counterclaim.
- Petitioner filed a Motion for Reconsideration in the Court of Appeals which was denied; petitioner then filed the present petition to the Supreme Court raising three principal assignments of error.
Parties and Corporate Background
- Petitioner: Ryuichi Yamamoto, a Japanese national.
- Respondents: Nishino Leather Industries, Inc. (formerly Wako Enterprises Manila, Incorporated or WAKO) and Ikuo Nishino, a Japanese national.
- WAKO organized in 1983 under Philippine laws by Yamamoto; engaged principally in leather tanning; corporate name later changed to Nishino Leather Industries, Inc. (NLII).
- In 1987, Yamamoto and respondent Ikuo Nishino executed a Memorandum of Agreement providing for a joint venture where Nishino would acquire shares equivalent to 70% of WAKO’s authorized capital stock.
- Eventually Ikuo Nishino and his brother Yoshinobu Nishino acquired more than 70% of the authorized capital stock, thereby allegedly reducing Yamamoto’s investment to 10% (by Yamamoto’s claim) or less than 10% (according to Nishino).
Factual Background – Negotiations and Machinery Claim
- Negotiations took place concerning the planned takeover of NLII by Nishino, including a buy-out of Yamamoto’s shares.
- Counsel for Yoshinobu and Ikuo Nishino, Atty. Emmanuel G. Doce, wrote Yamamoto a letter dated October 30, 1991 summarizing discussions.
- Paragraph 12 of the October 30, 1991 letter listed machinery and equipment contributed by Yamamoto to the company (splitting machine, samming machine, forklift, drums, toggling machines) and stated: “Regarding the above machines, you may take them out with you (for your own use and sale) if you want, provided, the value of such machines is deducted from your and Wako’s capital contributions, which will be paid to you. Kindly let me know of your comments on all the above, soonest.” (Emphasis and underscoring in source.)
- Yamamoto asserted those machineries and equipment comprised part of his investment in the corporation and attempted to recover them; respondents resisted.
Trial Court Proceedings and Writ of Replevin
- Yamamoto filed a complaint for replevin on January 15, 1992 before the RTC of Makati.
- Branch 45 of the Makati RTC issued a writ of replevin after Yamamoto posted bond; implementation led to seizure of the machineries and equipment.
- Respondents answered and filed a counterclaim alleging: (a) the machineries and equipment formed part of Yamamoto’s capital contributions and thus corporate property of NLII; (b) Atty. Doce’s letter was merely a proposal conditioned upon Yamamoto’s sell-out to Nishino and was not yet authorized by NLII’s stockholders and Board of Directors; and (c) respondents suffered damage from the seizure, seeking moral and exemplary damages, attorney’s fees, litigation expenses, and costs of suit.
- The RTC, by Decision dated June 9, 1995, found for Yamamoto: declared him rightful owner and possessor of the machineries, made the writ permanent, awarded attorney’s fees and expenses of litigation amounting to P50,000, dismissed defendants’ counterclaims, and ordered defendants to pay costs.
Court of Appeals Ruling
- The Court of Appeals reversed the RTC and dismissed Yamamoto’s complaint (Decision of May 30, 2001, penned by Justice Josefina Guevara-Salonga).
- The appellate court held:
- The machineries and equipment were corporate property of NLII and could not be retrieved without the authority of NLII’s Board of Directors.
- The argument that Nishino and Yamamoto cannot hide behind the shield of corporate fiction did not lie in the circumstances of the case.
- The doctrine of promissory estoppel was inapplicable to petitioner’s claim.
- No ground existed to support respondents’ counterclaim.
- The Court of Appeals denied petitioner’s Motion for Reconsideration.
Issues Presented to the Supreme Court by Petitioner
- A. Whether th