WESTERN AGRO INDUSTRIAL CORPORATION AND ANTONIO RODRIGUEZ, PETITIONERS, VS. HON. COURT OF APPEALS AND SIA’S AUTOMOTIVE AND DIESEL PARTS, INC., RESPONDENTS.

The petitioners question the binding effect of the pre-trial
order in this case and the liability imposed upon an officer solidarily with the corporation he represented.  The petitioners were ordered by both the
trial court and the Court of Appeals to pay, jointly and severally, the sum of
P84,626.70, the interests thereon from June 6, 1983 until paid, twenty-five
percent (25%) of the amounts awarded as attorney’s fees, and costs.

On June 6, 1983
respondent SIA Automotive and Diesel Parts, Inc. (SIA) filed with the Regional
Trial Court of
Caloocan City a complaint for “sum of money and damages” against
petitioners Western Agro Industrial Corporation (WESGRO) and/or Antonio
Rodriguez.  The complaint alleged that
WESGRO is doing business through Antonio Rodriguez and on different occasions
in 1980, 1981 and 1982, Rodriguez, representing WESGRO bought on credit
different automotive spare parts from the private respondent amounting to P100,753.80; that the said amount has long become over due and
yet the petitioners refused to pay despite repeated demands.  The complaint prayed among others that the
defendants jointly and severally pay the plaintiff:  (a) the principal sum of P100,753.80 plus legal interest and the sum equivalent to 25% in
the form of attorney’s fees as stipulated in the invoices covering the
accounts.

In its answer with counterclaim, WESGRO admitted that it bought
on credit various automotive spare parts from the respondent corporation on
different occasions in 1980, 1981 and 1982, represented by Antonio Rodriguez
but denied that its total obligation was P100,753.80.  WESGRO alleged that this amount is bloated
because it had already made various payments on different dates.

For his part, Antonio Rodriguez filed a motion to dismiss on the
ground that the complaint states no cause of action against him.  He alleged that he is a director and officer
of WESGRO and that he entered into the purchase contract with the respondent
corporation in his capacity as officer or agent of WESGRO and therefore such
contract was with WESGRO as a distinct legal entity and did not confer rights
much less liabilities on him.

The trial court denied the motion to dismiss in its order dated November 23, 1983.  The trial court ruled:

“xxx                           xxx                               xxx

While it is true that contracts entered into by authorized officers
or agents of a Corporation are contracts of the Corporation as a distinct
entity, yet under the circumstances above-mentioned, the Court finds it
necessary to include defendant, Antonio Rodriguez, as party defendant, for the
Court to arrive at a judicious adjudication on the matter.” (Rollo, p. 43)

Rodriguez filed with the then Intermediate Appellate Court a
petition for certiorari, prohibition and mandamus for the review
of the aforestated order.  The petition (docketed as Case No. AC-62562)
was, however, denied.

In his answer with counterclaim, Rodriguez denied that “x x x WESGRO is doing business
through answering defendant such allegation, being misleading as he is only one
of the officers representing WESGRO in various business transactions x x x” (Rollo
p. 45) and that “x x x his dealings with the
plaintiff were always in the name of WESGRO, a fact which is recognized by the
plaintiff.” (Rollo, p. 46).  He, however, admitted that he had represented
WESGRO in purchasing certain spare parts on credit.

After several postponements, the pre-trial was held on April 9, 1984.  On this same date, the trial court issued a
Pre-Trial Order, to wit:

“Parties agreed that the defendant, Western Agro Industrial
Corporation ordered from the plaintiff, automotive spare parts which have not
been paid.  Payment was agreed by Western
Agro Industrial Corporation and Sia’s Automotive and
Diesel Parts, Inc. that the defendant agreed to pay the plaintiff the sum of
P85,000.00, more or less.  The only question now remaining in litigation
is the remaining sum of P15,000.00, more or less.”
(Original Records, p. 68)

The initial hearing of the case was held on May 24, 1984. 
Upon agreement of the parties, the pre-trial order was amended to change
the sum of P85,000.00 to P84,626.70.  Upon the initiative of the petitioners’
counsel, the order was further amended to show that x x
x it is only defendant Western Agro Industrial
Corporation that is admitting the liability not the defendant Antonio Rodriguez.  (TSN page 15, May 24,
1984).  During the same hearing,
the respondent corporation rested its case after presenting the corporation’s
manager Juanito V. Lim, as its sole witness together
with several documents.

On the other hand, the petitioners manifested that after a review
of the nature of the plaintiff’s evidence they decided not to present any
evidence.  Instead, they would simply file a memorandum.  The motion was granted by the trial court in
its order dated July 5, 1984.

On October 5, 1984,
the trial court rendered a decision, the dispositive
portion of which reads:

“WHEREFORE, judgment is rendered in favor of the plaintiff and
against the defendants, ordering defendants to pay jointly and severally to the
plaintiff the sum of P84,626.70 with legal rate of
interest from the filing of the complaint on June 6, 1983 until fully paid; to
pay, jointly and severally 25% of the amount awarded to plaintiff as attorney’s
fees; and to pay the costs.

The Counterclaim is DISMISSED.” (Original Records, pp. 101-102)

As stated earlier, the trial court’s decision was affirmed by the
Court of Appeals.  A motion for
reconsideration was denied.  Hence, this petition.

The issues raised can be categorized into the following:  first, whether or not the petitioners are
bound by the PRE-TRIAL ORDER of the trial court; and second, whether or not
petitioner Antonio Rodriguez can be made solidarily
liable with the petitioner corporation for debts incurred by the latter.

Anent the first issue, the petitioners capitalize on the fact
that a copy of the pre-trial order was not served on them.  They theorize that since the Pre-trial Order
was promulgated by the trial court without the direct participation of the
parties, the latter are not bound by the order until such time that the same is
served upon them, otherwise, admissions may be stated in the pre-trial order
which were not made at all during the Pre-Trial Conference.  The petitioners contend that the trial court
erroneously stated that the petitioner corporation admitted its liability.

The petitioners are correct in stating that notice to the parties
of a Pre-Trial Order is indispensable to afford them an opportunity to check
the accuracy of what transpired during a
pre-trial conference.  Procedural
due process demands that such notice be served upon the parties in the same
manner as other orders, resolutions and decisions of the court in order that
they may become binding upon the parties.

We, however, take exception to the literal application of the
rule in the instant case.  The record
shows that the petitioners knew all along the existence of the Pre-trial Order
and that the petitioners’ counsel actively participated in the amendment of the
order to change the amount of the corporation’s liability which was P85,000.00
in the Pre-Trial Order to P84,626.70 as agreed upon by the parties.  The petitioners asked that the admitted
amount be amended to make the obligation reflect the truth.  This can be gleaned from the tenor of the
proceedings during the trial of the case on May 24, 1984 where Atty. Benjamin
C. Santos the petitioners’ counsel was present and where the following
transpired:

“Atty. Bonifacio:

I will connect the
materiality of this, Your Honor, because that is included in our complaint in
the claim of one hundred thousand something like that
more or less.  This amount is deemed
included because Western Agro Industrial Corporation only admitted more or less
eighty-five thousand  which is now the …

Court:

What is involved here
according to you is fifteen thousand.

Atty. Bonifacio:

Yes, Your
Honor.

Court:

Only  fifteen  thousand
pesos (P15,000.00).

Atty. Bonifacio:

Because of your
agreement stating to remand this to the lower court for hearing because that is
the only amount involved now.

Court:

As a matter of fact, I
have issued an order to the effect.

Atty. Bonifacio:

Yes, Your
Honor.  We have read it.  But we are just marking more or less the
admitted amount of P85,000.00.

Atty. Santos:

To be exact, it would
appear to be eighty-four thousand …….

Court:

I have issued an
order.  Let me see the records.  Pre-trial Order – Parties agreed that the
defendant Western Agro Industrial Corporation ordered from the plaintiff,
automotive spare parts which have not been paid.  Payment was agreed by Western Agro Industrial
Corporation and Sia’s Automotive and Diesel Parts,
Incorporated that the defendant agreed to pay the plaintiff the sum of P85,000.00 more or less. 
The only question now remaining in litigation is the remaining sum of
P15,000.00 more or less.  Why do you have to prove the P85,000.00?

Atty. Bonifacio:

We are just marking
those exhibits, Your Honor.

Court:

This is the pre-trial
order.  Just mark those exhibits.

Atty. Bonifacio:

The admitted amount is
actually P84,626.70, Your Honor.  We are not proving the controverted
portion of P15,000.00.

Court:

What is the use when the
defendant had admitted?

Atty. Bonifacio:

This is the controverted portion, Your Honor.

Court:

Precisely, I am asking
you to show evidence on the P15,000.00 which is the
controversy.

Atty. Bonifacio:

We are now going to
that, Your Honor.

Court:

What about this Worthy Trucking?

Atty. Bonifacio:

The Worthy Trucking is
the sister company of the defendant, Your Honor.

Court:

But that is already
admitted by them.  They will pay you
already.  They agreed to pay you, is it
not?

You read your pre-trial
order and that has not been questioned by any of the parties.

Atty. Santos:

Except
for the exact amount.  The order says P85,000.00 more or less.  The order is still
correct.

Court:

You now correct the
amount.

Atty. Santos:

Based on the
document of plaintiff it is P84,626.70, Your Honor.  This is the amount admitted by defendant
Western Agro Industrial only.

Court:

Is that correct?

Atty. Bonifacio:

Is that correct?  Yes, Your
Honor.  It is because in the pre-trial
order it is P85,000.00 more or less.  But the exact amount is P84,626.70.

Court:

Order – At the hearing
today, the parties agreed that the defendants Western Agro Industrial
Corporation and Antonio Rodriguez are indebted to the plaintiff in the amount
of P84,626.70.

Atty. Santos:

May we interrupt at this
juncture, Your Honor, it is only defendant
Western Agro Industrial Corporation that is
admitting the liability, not the defendant
Antonio Rodriguez.

Court:

Remove that Antonio Rodriguez.

WHEREFORE,
the pre–trial
order dated April 9,
1984 is hereby amended so as to
correct the sum of P85,000.00
to P84,626.70.

Atty. Bonifacio:

Yes, Your
Honor.” (TSN, May 24, 1984, pp. 10-15)

The petitioners are bound by their own admissions during the
trial.  Section 2, Rule 129 of the Rules
of Court provides that “Admissions made by the parties in the pleadings, or in
the course of the trial or other proceedings do not require proof and cannot be
contradicted unless previously shown to have been made through palpable
mistake.” The petitioners have not shown that their admissions were tainted by
palpable mistake.  They cannot claim that
they had no notice of the pre-trial order.

It should be noted, however, that the admission regarding the
amount of liability stated in the Pre?Trial Order pertained only to the
petitioner corporation.  This was
clarified during the trial.  Hence, the
parties agreed during the pre-trial order’s amendment that it was only the
petitioner corporation which admitted its indebtedness to the respondent
corporation in the amount of P84,626.70.

This brings us to the issue as to whether or not Antonio
Rodriguez was correctly made solidarily liable with
the petitioner corporation for the P84,626.70 debt
incurred by the latter.

In deciding this issue the appellate court ruled:

“xxx                                  xxx                               xxx

While it is true that contracts entered into by authorized officers
or agents of a corporation are contracts of the corporation as a distinct
entity, yet the admission of appellant Rodriquez that he represented the
corporation on different occasions in 1980, 1981, and 1982 and by reason of
this representation defendant WESGRO bought on credit automotive spare parts
amounting to P100,000.00, more or less, laid the basis
for impleading him. 
The Court a quo was correct to include him as a proper
party to arrive at a ‘judicious adjudication on the matter.’

“It should also be mentioned here that in defendant’s (Rodriquez) Answer (par. 3), he admitted having represented WESGRO in
various business transactions.  However,
defendant WESGRO admitted they are only liable for P47,727.60.  Since there is the problem of who should
shoulder the total obligation, the court was right in impleading
defendant Rodriquez.

“Moreover, defendant’s (Rodriquez) motion to dismiss was denied by
the court a quo and its petition for certiorari based on
such denial was likewise dismissed by this Court in AC-GR Sp No. 02562.  This Court in its decision dated April 30, 1984 ruled as follows:

‘Considered in that light, we fail to see how respondent Judge
could have acted with grave abuse of discretion in denying petitioner’s motion
to dismiss.  It was clearly alleged in
the complaint in Case No. C-10798 that petitioner acting for and in behalf of
defendant corporation, incurred the obligation involved.  He directly dealt and transacted with plaintiff corporation, which, trusting in his
representations, agreed to deliver and in fact, delivered the goods on
credit.  Petitioner is therefore a proper
party whose inclusion as defendant in this case is necessary if complete relief
is to be accorded to party plaintiff.’

In the foregoing instances, it is likewise pertinent to cite
Section 13, Rule 3 of the Rules of Court, which provides:

‘Section 13.  Alternative defendants – where
the plaintiff is uncertain against which of several persons he is entitled to
relief, he may join any or all of them as defendants in the alternative
although a right to relief against one may be inconsistent with a right to
relief against the other.’” (Rollo, p. 28-29)

It appears, therefore, that the appellate court’s ruling that
Antonio Rodriguez is solidarily liable with WESGRO
for the latter’s P84,626.70 obligation to SIA is based
principally on the ground that Rodriguez represented WESGRO in its dealings
with SIA.

It is significant to note that SIA never questioned the legal
personality of WESGRO.  Hence, we can
assume that WESGRO is a bona fide corporation.  Therefore, as a bona fide
corporation, WESGRO should alone be liable for its corporate acts as duly
authorized by its officers and directors. 
(Caram, Jr. v. Court of
Appeals, 151 SCRA 372 [1987]). 
This is so, because a corporation “is invested by law with a separate
personality, separate and distinct from that of the persons composing it as
well as from any other legal entity to which it may be related.” (Tan Boon Bee
& Co, Inc. v. Jarencio 163 SCRA 205 [1988] citing
Yutivo and Sons Hardware Company v. Court of Tax
Appeals, 1 SCRA 160 [1961]; Emilio Cano Enterprises, Inc. v. Court of
Industrial Relations, 13 SCRA 290 [1965]). 
A corporation is an artificial person and can transact its business only
through its officers or agents. 
Necessarily, somebody has to act for it. 
The separate personality of the corporation may be disregarded, or the
veil of corporate fiction pierced and the individual stockholders may be
personally liable to obligations of the corporation only when the corporation
is used “as a cloak or cover for fraud or illegality, or to work an injustice,
or where necessary to achieve equity or when necessary for the protection of
creditors.” (Sulo ng Bayan, Inc. v. Araneta, Inc., 72 SCRA 347 [1976] cited in Tan Boon Bee
& Co., Inc. v. Jarencio, supra).

In the case at bar, there is no showing that Antonio Rodriguez, a
director and officer of WESGRO was not authorized by the corporation to enter
into purchase contracts with SIA. 
Moreover, the respondent corporation has not shown any circumstances
which would necessitate the piercing of the corporate veil so as to make
Rodriguez personally liable for the obligations incurred by the
petitioner.  Hence, the inevitable
conclusion is that he was acting in behalf of the corporation when he executed
the purchase contracts with the respondent corporation.  In other words, Rodriguez’ acts in
representing the petitioner corporation in its dealings with the respondent
corporation are corporate acts for which only the corporation should be made
liable for any obligations arising from them.

WHEREFORE, the instant
petition is hereby PARTLY GRANTED.  The
questioned decision of the Court of Appeals is modified in that petitioner
Antonio Rodriguez is declared not liable jointly and severally or otherwise
with petitioner WESTERN AGRO INDUSTRIAL CORPORATION for the money awards in
favor of respondent Sia’s Automotive and Diesel
Parts, Inc.  The decision is affirmed in
other respects.

SO ORDERED.

Fernan, C.J., (Chairman), Feliciano, Bidin, and Cortes, JJ., concur.