G.R. No. L-22614. August 29, 1969
RAMIREZ TELEPHONE CORPORATION, PETITIONER, VS. BANK OF AMERICA, E.F. HERBOSA, THE SHERIFF OF MANILA AND THE COURT OF APPEALS, RESPONDENTS.
CAPISTRANO, J.:
This is a petition for review on certiorari of a decision of the
Court of Appeals of February 27, 1964, wherein the judgment of the lower court
was reversed and another entered dismissing the complaint of plaintiff, now
petitioner, Ramirez Telephone Corporation, and ordering it to pay to defendant, now respondent,
Bank of America, the sum of P500.00 and to the third-party defendant E. F. Herbosa, now likewise respondent, the same amount, both in
the concept of attorney’s fees, the costs being adjudged likewise against
petitioner. The judgment of the Court of
First Instance which was reversed by the Court of Appeals reads as follows:[1]
“In view of the foregoing considerations, judgment is hereby
rendered in favor of the plaintiff and against the defendant Bank of America
ordering the latter to pay the former the sum of P3,000.00 in the form of actual
damages, and to pay the costs of these proceedings.
“Likewise, judgment is hereby rendered sentencing the
third-party defendant, E.F. Herbosa, to indemnify or reimburse the third-party plaintiff,
Bank of America, any sum or sums which the latter may pay the plaintiff by
virtue of this judgment.
“The third-party complaint against the Sheriff of Manila as
well as the counterclaim of defendant Bank of America and third-party
defendant E. F. Herbosa are hereby ordered
dismissed.”
The facts as found by the Court of Appeals, which we cannot
review are set forth in its decision thus:[2]
“Resultando: Que
los hechos al parecer, no son muy embrollados; el demandado, Herbosa era y es dueño del edificio No. 612, Int. 3 Sta. Mesa; se lo haba
dado en arrendamiento a Ruben R. Ramirez, y como este era el presidente de la Ramirez Telephone Corporation, el taller
de la corporacion aunque su oficina central estaba en la Escolta, Natividad Building, Exh. D. fue trasladado
al local: pero habiendose amontonado los alquileres sin pagar, Hdrbosa presento demanda de desahucio contra
Ramirez en el Juzgado Municipal de Manila el 10 de Noviembre, 1949, y elevada la causa al Juzgado del 1.a Instancia, Herbosa pudo conseguir
decision favorable alli el 14 de Octubre, 1950, pero en la vispera
de la promulgacion de la sentencia
a su favor habia ya conseguido mandamiento
de embargo preventivo contra Ramirez, Exh. A, y el mismo, servido
al Bank of America
el 13 de Octubre, 1950, Exh. 2, lease como sigue;
‘Civil Case No. 10620
E.F. Herbosa,
Plaintiff
-versus- GARNISHMENT
Ruben R. Ramirez, Defendant
To: Bank of America
Manila
‘Greetings:
You and each of you are
hereby notified that, by virtue of an order of attachment issued by the Court
of First Instance of Manila, copy of which is hereto attached, levy is hereby
made (or attachment is hereby levied) upon all the goods, effects, interests,
credits, money, stocks, shares, any interests
in stocks and shares and all debts owing by you to the defendant, Ruben R. Ramirez,
_______, in the above entitled case, and any other personal property in your
possession or under your control, belonging, to the said defendant _______on
this date, to cover the amount of P2,400.00 and specially the …
** ** **
‘Manila,
Philippines, October 13,
1950.
‘MACARIO M. OFILADA
Sheriff of Manila’
(Exh.
2);
y
fue contestado por el banco el mismo dia de la siguiente manera:
‘Dear Sir:
In reply to your
Garnishment of October 13, 1950, issued under the above-subject case,
we wish to inform you that we do not hold any fund in the name of the
defendant, Ruben R. Ramirez.
Yours very truly.’ (Exh.3);
pero el Sheriff
reitero el embargo el 17 Octubre,
1950, Exh.
B. notificando al Bank of America
de que quedaba embargado,
‘… the interest or participation which the
defendant Ruben R. Ramirez may or might have in the deposit of the Ramirez
Telephone. Inc., with that Bank sufficient to cover the said amount of
P2,400.00′; Exh. B; y
la institution bancaria
en contestation al Sheriff, de fecha 17 de Octubre, 1950, o
sea el mismo dia, hizo constar que:
‘… we are holding the amount of P2,400.00 in the name of the Ramirez Telephone
Inc. subjuct to your further orders.’, Exh. G;
es decir que acato
la notificacion del embargo de los
fondos de la Ramirez Telephone; ahora,
bien, recuerdase de que en aquella fecha, 17 de Octubre,.1950 es
Ramirez Telephone tenia en deposito
con el Bank of America, la suma de P4,789.53, Exh. 9; de manera que con el embargo,
– se recujo los fondos libres a la cantidad de P2,389.53; pero el dia siguiente, el Ramirez
Telephone retiro la suma de
P1, 500.00, quedando por
Canto como ultimo balance, nada mas que unos P889.00;
de esto surgio la presente contienda, pues, el 19 de Octubre, 1950,
la Ramirez Telephone por medio de su
presidente, el mismo demandado, Ruben Ramirez, ya mencionado, habiendo expedido el 19 de Octubre, 1950,
otro cheque en la suma de P2,320.00 a favor de la Ray Electronics, en pago de ciertos equipos vendidos por este ultimo, Exhs. 15, 17, L, el cheque Exh. N, este cheque al ser presentado a la
Bank of America, fue rechazado
por lo que el abogado de la Ramirez Telephone el 23, de Octubre, 1950, envio carta de requerimiento al Bank of
America, Exh. 14, manifestando
que su cliente
habia sufrido ‘considerable
damage and embarrassment’, y advirtiendole que si no se le diera completa satisfaccion el did siguiente, el presentaria la demanda correspondiente,
‘without further notice’, Exh. 14; esta carta la contesto
la institucion bancaria el
24 de Octubre, 1950, alegando que,
‘With reference to
your letter dated October 23, 1950,
in which you are writing in behalf of the Ramirez Telephone Corporation, it is
suggested that you obtain a release from the Court on Civil Case No. 10620,
Ruben E. Ramirez, defendant.
‘This Bank is acting
only in accordance with the garnishment and has no interest whatsoever in the
funds held’, Exh. 15;
pero conforme con su advertencia, el abogado de la
Ramirez Telephone Inc., incoo esta
accion el 28 de Octubre, cuatro dias despuez;
y el motivo de accion se hace consistir en que el banco,
‘. . . knows or should have known that Ruben
N. Ramirez the defendant in said Civil Case and whose property or fund was
ordered attached has no personal deposit in that bank and that the Ramirez
Telephone Corporation is entirely a distinct and separate entity regardless of
the fact that Ruben R. Ramirez happens to be its President and General
Manager.’ par. 4, demanda;
y
alegando que con motivo de ello y la siguiente devolution de su cheque a favor de la Ray Electronics sin pagar, esta habia
cancelado su pedido para los
equipos necesarios en la construecion de sus lineal telefonicas en la region bicolana,
asi que todas
sus operaciones se habian quedado paralizadas, par. 5, id.; la demandada
Bank of America emplazada de la demandada,
presento motion
de sobresimiento; que
denegada, el 4 de diciembre,
1950, ea banco
sometio su contestacion el 23 de diciembre,
1950, con reconvention para despues presentar
demanda contra el Sheriff el 25 de Agosto, 1955, y contra Herbosa,
el 16 de Agosto, 1955; y este ultimo a su vez en contestacion, presento contra reclamacion o mejor dicho, reconvercion
contra la misma demandante,
Ramirez Telephone, y tambien contra el Bank of
America, el 10 de Septiembre, 1955, y el Juzgado Inferior, despues de la vista, como ya se ha dicho, dictamino en favor de la demandante
contra el Bank of America en la contra-demanda de este contra aquel; ***.”
It was further found by the Court of Appeals:[3]
“Considerando: Que
el testimonio de Estanislao
Herbosa al efectode que; si bien. Ruben
R. Ramirez era su inquilino
al principio, pero es que mas
tarde, este lo habia manifestado que ‘the shop of
company was established
downstairs’, es decir que la Ramirez Telephone Corporation a la verdad ocupaba el local alquilado, tanto que Ruben R. Ramirez solia pagar el alquilar
en cheques de la Ramirez Telephone Corporation, y esta declaration, t.n. 10 y 11, 25 June, 1956, estando corroborada no solamente por el Exh. 12, en donde, Ruben R.
Ramirez, en papel con el embrete
de la Ramirez Telephone, habia eriviado el abogado
de Herbosa, el cheque No. C-78900, manifestando en la carta de que:
‘In accordance with your agreement
yesterday with my attorney, Mr. Jose L. de. Leon, I am sending you herewith
check No.C-78900 for the amount of P812.60,
rentals for the premises
I am occupying at the rate of P161.00 a month for the period from February 1, 1949 to June 30, 1949, both dates, inclusive, plus
P7.00 for the court costs.’ Exh. 12;
y esta carta, leida en relacion, con el Exh.
3, en donde se ve que Ruben R. Ramirez y
tenia fondos depositados en el
banco mencionado, Bank of
America, asi que resulta evidente que los fondos de la Ramirez Telephone los eran a la verdad,
fondos de que buenasanta podia disponer su Presidente,
Ruben R. Ramirez, para el pago de los alquillares
por el debidos a Herbosa, y
luego, tambien resulta evidente de que la casa por el alquilada bien resulta evidente de que la casa per el alquilada Ramirez
Telephone, y estos hecho agregados el otro hecho tambien probado,
de que el 75% de las acciones de la compañia pertenecia a Ruben
Ramirez y su esposa, Rizalina P. de Ramirez, Exh. E, todos estos hechos
no pueden menos de justificar la conclusion de que
el embargo de los Condos de la Ramirez Telephone por y en virtud de un mandamiento judicial de embargo contra Ruben R. Ramirez, especialmente teniendo en cuenta que el embargo solo abarcaba,
‘The interest or participation which the
defendant Ruben R. Ramirez may or might have in the deposit of the Ramirez Telephone
Inc., in the amount of P2, 400.00’ Exh. B;
cuando entonces estaba depositada la cantidad de P4,857.28, Exh 9, era un acto de justicia
a favor del acreedor Herbosa
y a la verdad, de no haberse permitido el mencionado embargo, este se hubiera visto en igual situacion que aquel pobre
agraviado que Como se .dice
vulgarmente, tras de cornudo, fue apaleado; * * *.”
The aforestated
facts notwithstanding, which must be considered conclusive and binding on us,
plaintiff in the lower court, now petitioner, Ramirez Telephone Corporation, as
noted, appealed, assigning the following alleged errors:[4]
“I
“The Court of Appeals erred in not applying the settled legal
principle that a corporation has a personality separate and distinct from that
of its stockholders and therefore, the funds of a corporation cannot be reached
to satisfy the debt of its stockholders.
“II
“The Court of Appeals erred in not taking into account the
significant fact that when the events that gave rise to this case took place,
the lawyer of both respondents, i.e., the
Bank of America and E. F. Herbosa, was one and the
same.
“III
“The Court of Appeals erred in not granting petitioner damages
as awarded by
the lower court; likewise; the Court
of Appeals erred in declaring instead
that it is petitioner that should pay respondents attorneys’ fees.”
Petitioner’s main
grievance in the first assigned error is that the Court of Appeals disregarded its corporate
personality; it relies on the general principle “that the corporate
entity will not be disregarded, no matter
how large the holding a particular stockholder may have in the corporation.“[5] Petitioner would thus maintain that the
personality as an entity separate and distinct from its major stockholders,
Ruben R. Ramirez and his wife, was not to be disregarded even if they did own
75% of the stock of the corporation.[6] The conclusion that would thus emerge, in
petitioner’s opinion, is that its funds as a corporation can not be garnished
to satisfy the debts of a principal stockholder.
While respect for the
corporate personality as such is the general rule, there are exceptions. In
appropriate cases, the veil of corporate fiction may be pierced. From the facts as found which must remain
undisturbed, this is such a case. This
assignment of error has no merit, in view of a number of cases decided by this
Court, the latest of which is Albert v. Court of First Instance[7] reaffirming a 1965 resolution in Albert v. University Publishing
Co., Inc.[8] In that resolution, the principle restated
thus: “Even with regard to
corporations duly organized and existing under the law, we have in many a case pierced the veil of corporate fiction
to administer the ends of justice.” In support of the above principle, the following cases were
cited: Arnold vs. Willits & Patterson,
Ltd., 44 Phil. 634; Koppel (Phil.), Inc. vs. Yatco; 77 Phil. 496; La Campana Coffee Factory, Inc. vs. Kaisahan ng mga Manggagawa sa La Campana, 93 Phil. 16o; Marvel Building Corporation vs.
David, 94 Phil. 376; Madrigal Shipping Co., Inc. vs. Ogilvie, G.R. No. L-8431, Oct. 30, 1958; Laguna Transportation Co., Inc. vs.
S.S.S., G.R. No. L-14606, April 28, 1960; McConnel vs. C.A., G.R. No. L-10510, March
17, 1961; Liddel & Co., Inc. vs. Collector of Internal Revenue, G.R. No. L-9687,June 30,1961; Palacio vs. FelyTransporation Co., G.R. No. L-15121, August 31, 1962. Hence, to repeat the first assigned error cannot be sustained.
The next two errors
assigned likewise fail to call for
a reversal of the judgment now on appeal. The second alleged error would find fault with the decision because the
Court of Appeals allegedly did not take into
account a significant fact, namely, that only one lawyer represented
both the respondent Bank of America and respondent E. F. Herbosa.
We are not called upon to consider this particular assignment of error as it is
essentially factual, which is a matter for the Court of Appeals, not for us, to determine. The last assigned error would in effect seek a restatement of
the damages awarded petitioner on the
theory that the Court of Appeals decided the matter erroneously. Since, as we made clear in the foregoing, the
decision of the Court of Appeals is in accordance with law on the facts as
found, this alleged error likewise is
not meritorious.
PREMISES CONSIDERED, the judgment Of the Court of Appeals of February 27, 1964 is affirmed, with
costs against petitioner Ramirez Telephone Corporation.
Concepcion, C.J., Dizon,
Makalintal, Sanchez, Castro, Fernando, Teehankee and Barredo, JJ., concur.
Reyes and Zaldivar, JJ., are on
leave.
[1]
Statement of the Case, Brief for the Petitioner, p.2.
[2]
Ibid, pp. 25-31.
[3]
Ibid, pp.
36-37.
[4]
Assignment of Errors, Brief for the Petitioner.
[5]
Statement of Facts, Brief for the Petitioner, p. 10.
[6]
Ibid, p. 12.
[7]
23 SCRA 948 (1968).
[8]
G.R. No. L-19118, January 30, 1965.