NATIONAL MARKETING CORPORATION (NAMARCO), PLAINTIFF AND APPELLANT, VS. ASSOCIATED FINANCE COMPANY, INC., AND FRANCISCO SYCIP, DEFENDANTS, FRANCISCO SYCIP, DEFENDANT AND APPELLEE.

Appeal taken by the
National Marketing Corporation – hereinafter referred to as NAMARCO, from the
decision of the Court of First Instance of Manila in Civil Case No. 45770
ordering the Associated Finance Company, Inc. – hereinafter referred
to as the ASSOCIATED – to pay the NAMARCO the sum of P403,514.28, with legal
interest thereon from the date of filing of the action until fully paid,
P80,702.26 as liquidated damages, P5,000.00 as attorney’s fees, plus costs, but
dismissing the complaint insofar as defendant Francisco Sycip was concerned, as well
as the latter’s counterclaim.  The appeal
is only from that portion of the decision dismissing the case as against
Francisco Sycip.

On March 25, 1958, ASSOCIATED, a domestic corporation, through
its President, appellee Francisco Sycip,
entered into an agreement to exchange sugar with NAMARCO, represented by its
then General Manager, Benjamin Estrella, whereby the
former would deliver to the latter 22,516 bags (each weighing 100 pounds) of
“Victorias” and/or “National”
refined sugar in exchange for 7,732.71 bags of “Busilak”
and 17,285.08 piculs of “Pasumil”
raw sugar belonging to NAMARCO, both agreeing to pay liquidated damages
equivalent to 20% of the contractual value of the sugar should either party
fail to comply with the terms and conditions stipulated (Exhibit A).  Pursuant thereto, on May 19, 1958,
NAMARCO delivered to ASSOCIATED 7,732.71 bags of “Busilak”
and 17,285.08 piculs of “Pasumil”
domestic raw sugar.  As ASSOCIATED failed
to deliver to NAMARCO the 22,516 bags of “Victorias”
and/or “National” refined sugar agreed upon, the latter, on January
12, 1959, demanded in writing from the ASSOCIATED either (a) immediate delivery
thereof before January 20, or (b) payment of its equivalent cash value amounting
to P372,639.80.

On January 19, 1959,
ASSOCIATED, through Sycip, offered to pay NAMARCO the
value of 22,516 bags of refined sugar at the rate of P15.30 per bag, but the
latter rejected the offer.  In­stead, on
January 21 of the same year, it demanded payment of the 7,732.71 bags of “Busilak” raw sugar at P15.30 per bag, amounting to
P118,310.40, and of the 17,285.08 piculs
of “Pasumil” raw sugar at P16.50 per picul, amounting to P285,203.82, or a total price of
P403,514.28 for both kinds of sugar, based on the sugar quotations (Exh. H) as of March 20, 1958 – the date when the exchange
agreement was entered into.

As ASSOCIATED refused to deliver the raw sugar or pay for the
refined sugar delivered to it, inspite of repeated
demands therefore, NAMARCO instituted the present action in the lower court to
recover the sum of P403,514.28 in payment of the raw
sugar received by defendants from it; P80,702.86 as liquidated damages;
P10,000.00 as attorney’s fees, expenses of litigation and exemplary damages,
with legal interest thereon from the filing of the complaint until fully paid.

In their amended answer defendants, by way of affirmative
defenses, alleged that the correct value of the sugar delivered by NAMARCO to
them was P259,451.09 or P13.30 per bag of 100 lbs.
weight (quedan basis) and not P403,514.38 as claimed
by NAMARCO.  As counterclaim they prayed
for the award of P500,000.00 as moral damages,
P100,000.00 as exemplary damages
and P10,000.00 as attorney’s fees.

After due trial the court
rendered the appealed judgment.  The
appeal was taken to the Court of Appeals, but on January 15, 1963 the latter
certified the case to Us for final adjudication pursuant to sections 17 and 31
of the Judiciary Act of 1948, as amended, the amount involved being more than
P200,000.00, exclusive of interests and costs.

The only issue to be resolved is whether, upon the facts found by
the trial court, – which, in our opinion, are fully supported by the evidence –
Francisco Sycip may be held liable, jointly and
severally with his co-defendant, for the sums of money adjudged in favor of
NAMARCO.

The evidence of record shows that, of the capital stock of
ASSOCIATED, Sycip owned P60,000.00 worth of shares,
while his wife – the second biggest stockholder – owned P20,000.00 worth of
shares; that the par value of the subscribed capital stock of ASSOCIATED was only P105,000.00; that
negotiations that lead to the execution of the exchange agreement in question
were conducted exclusively by Sycip on behalf of
ASSOCIATED; that, as a matter of fact, in the course of his testimony, Sycip referred to himself as the one who contracted or
transacted the business in his personal capacity, and asserted that the
exchange agreement was his personal contract; that it was Sycip
who made personal representations and gave assurances that ASSOCIATED was in
actual possession of the 22,516 bags of “Victorias”
and/or “National” refined sugar which the latter had agreed to
deliver to NAMARCO, and that the same was ready for delivery; that, as a matter
of fact, ASSOCIATED was at that
time already insolvent; that when NAMARCO made written demands upon ASSOCIATED
to deliver the 22,516 bags of refined sugar it was under obligation to de­liver
to the former, ASSOCIATED and Sycip, instead of
making delivery of the sugar, offered to pay its value at the rate of P15.30
per bag – a clear indication that
they did not have the sugar contracted for.

The foregoing facts, fully established by the evidence, can lead
to no other conclusion than that Sycip was guilty of
fraud because through false representations he succeeded in inducing NAMARCO to
enter into the aforesaid exchange agreement, with full knowledge, on his part,
of the fact that ASSOCIATED whom he represented and over whose business
and affairs he had absolute control, was in no position to comply with the obligation it had assumed.  Consequently, he can not now seek refuge
behind the general principle that a corporation has a personality distinct and
separate from that of its stockholders and that the latter are not personally
liable for the corporate obligations.  To
the contrary, upon the proven facts, We feel perfectly
jus­tified in “piercing the veil of corporate fiction” and in holding
Sycip personally liable, jointly and severally with
his co-defendant, for the sums of money adjudged in favor of appellant.  It is settled law in this and other
jurisdictions that when the corporation is the mere alter ego of a person, the corporate fiction may be disregarded; the same
being true when the cor­poration is controlled, and its affairs are so
conducted as to make it merely an instrumentality, agency or conduit of another
(Koppel Phils. etc. vs. Yatco
etc., 43 O.G. No. 11, Nov. 1947; Yutivo Sons etc. vs.
Court of Tax Appeals etc., G.R. No. L-13203, promulgated on January 28, 1961.

WHEREFORE, the decision appealed from is modified by
sentencing defendant-appellee Francisco Sycip to pay, jointly and severally with the Associated
Finance Company, Inc., the sums of money which the trial court sentenced the
latter to pay to the National Marketing Corporation, as follows:  the sum of FOUR HUNDRED THREE THOUSAND FIVE
HUNDRED FOURTEEN PESOS and
TWENTY-EIGHT CENTAVOS (P403,514.28), with interest at the legal rate from the
date of the filing of the action until fully paid plus an additional amount of
EIGHTY THOUSAND SEVEN HUNDRED TWO PESOS and EIGHTY-SIX CENTAVOS (P80,702.86) as
liquidated damages and P5,000.00
as attorney’s fees and further to pay the costs.

With costs.

Concepcion, C.J., Reyes, J.B.L., Regala, Makalintal, Bengzon, J.P., Zaldivar, and Sanchez, JJ., concur.

Ruiz Castro, J., took no part.