MANUEL R. DULAY ENTERPRISES, INC., VIRGILIO E. DULAY AND NEPOMUCENO REDOVAN, PETITIONERS, VS. THE HONORABLE COURT OF APPEALS, EDGARDO D. PABALAN, MANUEL A. TORRES, JR., MARIA TH…

This is a petition for review on certiorari to annul and
set aside the decision^[1] of
the Court of Appeals affirming the decision^[2] of
the Regional Trial Court of Pasay, Branch 114 in Civil Cases Nos. 8198-P,
8278-P and 2880-P, the dispositive portion of which reads, as follows:

“WHEREFORE, in view of all the foregoing considerations, this
Court hereby renders judgment, as follows:

“In Civil Case No. 2880-P, the petition filed by Manuel R.
Dulay Enterprises, Inc. and Virgilio E. Dulay for annulment or declaration of
nullity of the decision of the Metropolitan Trial Court, Branch 46, Pasay City,
in its Civil Case No. 38-81 entitled ‘Edgardo D. Pabalan, et al., vs. Spouses
Florentino Manalastas, et al.,’ is dismissed for lack of merit;

“In Civil Case No. 8278-P, the complaint filed by Manuel R.
Dulay Enterprises, Inc. for cancellation of title of Manuel A. Torres, Jr. (TCT
No. 1 24799 of the Register of Deeds of Pasay City) and reconveyance, is
dismissed for lack of merit; and,

“In Civil Case No. 8198-P, defendants Manuel R. Dulay
Enterprises, Inc. and Virgilio E. Dulay are ordered to surrender and deliver
possession of the parcel of land, together with all the improvements thereon,
described in Transfer Certificate of Title No. 24799 of the Register of Deeds
of Pasay City, in favor of therein plaintiffs Manuel A. Torres, Jr. as owner
and Edgardo D. Pabalan as real estate administrator of said Manuel A. Torres,
Jr.; to account for and return to said plaintiffs the rentals from dwelling
unit No. 8-A of the apartment building (Dulay Apartment) from June 1980 up to
the present; to indemnify plaintiffs, jointly and severally, expenses of
litigation in the amount of P4,000.00
and attorney’s fees in the sum of P6,000.00, for all the three (3) cases. Co-defendant Nepomuceno Redovan is ordered
to pay the current and subsequent rentals on the premises leased by him to
plaintiffs.

“The counterclaim of defendants Virgilio E. Dulay and Manuel
R. Dulay Enterprises, Inc. and N. Redovan, is dismissed for lack of merit. With costs against the three (3) aforenamed
defendants.”^[3]

The facts as found by the trial court are as follows:

Petitioner Manuel R. Dulay Enterprises, Inc., a domestic
corporation with the following as members of its Board of Directors: Manuel R. Dulay with 19,960 shares and
designated as president, treasurer and general manager; Atty. Virgilio E. Dulay
with 10 shares and designated as vice-president; Linda E. Dulay with 10 shares;
Celia Dulay-Mendoza with 10 shares; and Atty. Plaridel C. Jose with 10 shares
and designated as secretary, owned a property covered by TCT No. 17880^[4]
and known as Dulay Apartment consisting of sixteen (16) apartment units on a
six hundred eighty-nine (689) square meter lot, more or less, located at
Seventh Street (now Buendia Extension) and F.B. Harrison Street, Pasay City.

Petitioner corporation through its president, Manuel Dulay,
obtained various loans for the construction of its hotel project, Dulay
Continental Hotel (now Frederick Hotel). It even had to borrow money from petitioner Virgilio Dulay to be able to
continue the hotel project. As a result
of said loan, petitioner Virgilio Dulay occupied one of the unit apartments of
the subject property since 1973 while at the same time managing the Dulay
Apartment as his shareholdings in the corporation was subsequently increased by
his father.^[5]

On December 23, 1976, Manuel Dulay by virtue of Board Resolution
No. 18^[6]
of petitioner corporation sold the subject property to private respondents
spouses Maria Theresa and Castrense Veloso in the amount of P300,000.00 as
evidenced by the Deed of Absolute Sale.^[7]
Thereafter, TCT No. 17880 was cancelled and TCT No. 23225 was issued to private
respondent Maria Theresa Veloso.^[8]
Subsequently, Manuel Dulay and private respondents spouses Veloso executed a
Memorandum to the Deed of Absolute Sale of December 23, 1976^[9]
dated December 9, 1977 giving Manuel Dulay within two (2) years or until
December 9, 1979 to repurchase the subject property for P200,000.00 which was,
however, not annotated either in TCT No. 17880 or TCT No. 23225.

On December 24, 1976,
private respondent Maria Veloso, without the knowledge of Manuel Dulay,
mortgaged the subject property to private respondent Manuel A. Torres for a loan
of P250,000.00 which was duly annotated as
Entry No. 68139 in TCT
No. 23225.^[10]

Upon the failure of private respondent Maria Veloso to pay
private respondent Torres, the subject property was sold on April 5, 1978 to
private respondent Torres as the highest bidder in an extrajudicial foreclosure
sale as evidenced by the Certificate of Sheriff’s Sale^[11]
issued on April 20, 1978.

On July 20, 1978, private
respondent Maria Veloso executed a Deed of Absolute Assignment of the Right to
Redeem^[12]
in favor of Manuel Dulay assigning her right to repurchase the subject property
from private respondent Torres as a result of the extrajudicial sale held on
April 25, 1978.

As neither private respondent Maria Veloso nor her assignee
Manuel Dulay was able to redeem the subject property within the one year
statutory period for redemption, private respondent Torres filed an Affidavit
of Consolidation of Ownership^[13] with
the Registry of Deeds of Pasay City and TCT
No. 24799^[14]
was subsequently issued to private respondent Manuel Torres on April 23, 1979.

On October 1, 1979, private respondent Torres filed a petition
for the issuance of a writ of possession against private respondents spouses
Veloso and Manuel Dulay in LRC Case No. 1742-P. However, when petitioner Virgilio Dulay appeared in court to
intervene in said case alleging that Manuel Dulay was never authorized by the
petitioner corporation to sell or mortgage the subject property, the trial
court ordered private respondent Torres to implead petitioner corporation as an
indispensable party but the latter moved for the dismissal of his petition
which was granted in an Order dated April 8, 1980.

On June 20, 1980, private respondent Torres and Edgardo Pabalan,
real estate administrator of Torres, filed an action against petitioner
corporation, Virgilio Dulay and Nepomuceno Redovan, a tenant of Dulay Apartment
Unit No. 8­-A for the recovery of possession, sum of money and damages with
preliminary injunction in Civil Case No. 8198-P with the then Court of First
Instance of Rizal.

On July 21, 1980, petitioner corporation filed an action against
private respondents spouses Veloso and Torres for the cancellation of the
Certificate of Sheriff’s Sale and TCT No. 24799 in Civil Case No. 8278-P with
the then Court of First Instance of Rizal.

On January 29, 1981, private respondents Pabalan and Torres filed
an action against spouses Florentino and Elvira Manalastas, a tenant of Dulay
Apartment Unit No. 7-B, with petitioner corporation as intervenor for ejectment
in Civil Case No. 38-81 with the Metropolitan Trial Court of Pasay City which
rendered a decision on April 25, 1985, the dispositive portion of which reads,
as follows:

“WHEREFORE, judgment is hereby rendered in favor of the
plaintiff (herein private respondents) and against the defendants:

“1.  Ordering the defendants and all persons
claiming possession under them to vacate the premises;

“2.  Ordering the defendants to pay the rents in
the sum of P500.00 a month from May, 1979 until they shall have vacated the
premises with interest at the legal rate;

“3.  Ordering the defendants to pay attorney’s fees
in the sum of P2,000.00 and P1,000.00 as other expenses of litigation and for
them to pay the costs of the suit.”^[15]

Thereafter or on May 17, 1985, petitioner corporation and Virgilio
Dulay filed an action against the presiding judge of the Metropolitan Trial
Court of Pasay City, private respondents Pabalan and Torres for the annulment
of said decision with the Regional Trial Court of Pasay in Civil Case No.
2880-P.

Thereafter, the three (3) cases were jointly tried and the trial
court rendered a decision in favor of private respondents.

Not satisfied with said decision, petitioners appealed to the
Court of Appeals which rendered a decision on October 23, 1989, the dispositive
portion of which reads, as follows:

“PREMISES CONSIDERED, the decision being appealed should be as
it is hereby AFFIRMED in full.”^[16]

On November 8, 1989, petitioners filed a Motion for
Reconsideration which was denied on January 26, 1990.

Hence, this petition.

During the pendency of this petition, private respondent Torres
died on April 3, 1991 as shown in his death certificate^[17]
and named Torres-Pabalan Realty & Development Corporation as his heir in
his holographic will^[18]
dated October 31, 1986.

Petitioners contend that the respondent court had acted with
grave abuse of discretion when it applied the doctrine of piercing the veil of
corporate entity in the instant case considering that the sale of the subject
property between private respondents spouses Veloso and Manuel Dulay has no
binding effect on petitioner corporation as Board Resolution No. 18 which
authorized the sale of the subject property was resolved without the approval
of all the members of the board of directors
and said Board Resolution was prepared by a person not designated by the
corporation to be its secretary.

We do not agree.

Section 101 of the Corporation Code of the Philippines provides:

“Sec. 101. When board
meeting is unnecessary or improperly held. Unless the by-laws provide otherwise, any action by the directors of a
close corporation without a meeting shall nevertheless be deemed valid if:

“1. Before or after such action is taken,
written consent thereto is signed by all the directors; or

“2. All the stockholders have actual or implied
knowledge of the action and make no prompt objection thereto in writing; or

“3. The directors are accustomed to take
informal action with the express or implied acquiesce of all the stockholders;
or

“4. All the directors have express or implied knowledge
of the action in question and none of them makes prompt objection thereto in
writing.

“If a directors’ meeting is held without proper call or
notice, an action taken therein within the corporate powers is deemed ratified
by a director who failed to
attend, unless he promptly files his written objection with the secretary of
the corporation after having knowledge thereof.”

In the instant case, petitioner corporation is classified as a
close corporation and consequently a board resolution authorizing the sale or
mortgage of the subject property is not necessary to bind the corporation for
the action of its president. At any
rate, a corporate action taken at a board meeting without proper call or notice
in a close corporation is deemed ratified by the absent director unless the
latter promptly files his written objection with the secretary of the
corporation after having knowledge of the meeting which, in this case,
petitioner Virgilio Dulay failed to do.

It is relevant to note that although a corporation is an entity
which has a personality distinct and separate from its individual stockholders
or members,^[19]
the veil of corporate fiction may be pierced when it is used to defeat public
convenience, justify wrong, protect fraud or defend crime.^[20]
The privilege of being treated as an entity distinct and separate from its
stockholders or members is therefore confined to its legitimate uses and is
subject to certain limitations to prevent the commission of fraud or other
illegal or unfair act. When the corporation
is used merely as an alter ego or business conduit of a person, the law will
regard the corporation as the act of that person.^[21]
The Supreme Court had repeatedly disregarded the separate personality of the
corporation where the corporate entity was used to annul a valid contract
executed by one of its members.

Petitioners’ claim that the sale of the subject property by its
president, Manuel Dulay, to private respondents spouses Veloso is null and void
as the alleged Board Resolution No. 18 was passed without the knowledge and
consent of the other members of the board of directors cannot be
sustained. As correctly pointed out by
the respondent Court of Appeals:

“Appellant Virgilio E. Dulay’s protestations of complete
innocence to the effect that he never participated nor was even aware of any
meeting or resolution authorizing the mortgage or sale of the subject premises
(see par. 8, affidavit of Virgilio E. Dulay, dated May 31, 1984, p. 14, Exh.
“21”) is difficult to believe. On the contrary, he is very much privy to the transactions
involved. To begin with, he is an
incorporator and one of the board of directors designated at the time of the
organization of Manuel R. Dulay Enterprises, Inc. In ordinary parlance, the said entity is loosely referred to as a
‘family corporation’. The nomenclature,
if imprecise, however, fairly reflects the cohesiveness of a group and the
parochial instincts of the individual members of such an aggrupation of which
Manuel R. Dulay Enterprises, Inc. is typical: four-fifths of its incorporators being close relatives namely, three (3)
children and their father whose name identifies their corporation (Articles of
Incorporation of Manuel R. Dulay Enterprises, Inc., Exh.
“31-A”).”^[22]

Besides, the fact that petitioner Virgilio Dulay on June 24, 1975
executed an affidavit^[23] that
he was a signatory witness to the execution of the post-dated Deed of Absolute
Sale of the subject property in favor of private respondent Torres indicates
that he was aware of the transaction executed between his father and private
respondents and had, therefore, adequate knowledge about the sale of the
subject property to private respondents.

Consequently, petitioner corporation is liable for the act of
Manuel Dulay and the sale of the subject property to private respondents by
Manuel Dulay is valid and binding. As
stated by the trial court:

“x x x the sale between Manuel R. Dulay Enterprises, Inc. and
the spouses Maria Theresa V. Veloso and Castrense C. Veloso, was a corporate
act of the former and not a personal transaction of Manuel R. Dulay. This is so because Manuel R. Dulay was not
only president and treasurer but also the general manager of the
corporation. The corporation was a
closed family corporation and the only non-relative in the board of directors
was Atty. Plaridel C. Jose who appeared on paper as the secretary. There is no denying the fact, however, that
Maria Socorro R. Dulay at times acted as secretary x x x, the Court can not
lose sight of the fact that the Manuel R. Dulay Enterprises, Inc. is a closed
family corporation where the incorporators and directors belong to one single
family. It cannot be concealed that
Manuel R. Dulay as president, treasurer and general manager almost had absolute
control over the business and affairs of the corporation.”^[24]

Moreover, the appellate courts will not disturb the findings of
the trial judge unless he has plainly overlooked certain facts of substance and
value that, if considered, might affect the result of the case,^[25]
which is not present in the instant case.

Petitioners’ contention that private respondent Torres never
acquired ownership over the subject property since the latter was never in
actual possession of the subject property nor was the property ever delivered to
him is also without merit.

Paragraph 1, Article 1498 of the New Civil Code provides:

“When the sale is made through a public instrument, the execution
thereof shall be equivalent to the delivery of the thing which is the object of
the contract, if from the deed the contrary does not appear or cannot clearly
be inferred.”

Under the aforementioned article, the mere execution of the deed
of sale in a public document is equivalent to the delivery of the
property. Likewise, this Court had held
that:

“It is settled that the buyer in a foreclosure sale becomes the
absolute owner of the property purchased if it is not redeemed during the
period of one year after the registration of the sale. As such, he is entitled to the possession of
the said property and can demand it at any time following the consolidation of
ownership in his name and the issuance to him of a new transfer certificate of
title. The buyer can in fact demand
possession of the land even during the redemption period except that he has to
post a bond in accordance with Section 7 of Act No. 3133 as amended. No such bond is required after the
redemption period if the property is not redeemed. Possession of the land then becomes an absolute right of the
purchaser as confirmed owner.”^[26]

Therefore, prior physical delivery or possession is not legally
required since the execution of the Deed of Sale is deemed equivalent to
delivery.

Finally, we hold that the respondent appellate court did not err
in denying petitioner’s motion for reconsideration despite the fact that
private respondents failed to submit their comment to said motion as required
by the respondent appellate court. There is nothing in the Revised Rules of Court which prohibits the
respondent appellate court from resolving petitioners’ motion for
reconsideration without the comment of the private respondent which was
required merely to aid the court in the disposition of the motion. The courts are as much interested as the
parties in the early disposition of cases before them. To require otherwise would unnecessarily
clog the courts’ dockets.

WHEREFORE, the petition is DENIED and the decision
appealed from is hereby AFFIRMED.

SO ORDERED.

Narvasa, C.J., (Chairman), Padilla, and Regalado, JJ., concur.

Puno, J., no part.

^[1]
Penned by Justice Jorge S. Imperial with the concurrence of Justice Reynato S.
Puno and Justice Cezar D. Francisco.

^[2]
Penned by Judge Fermin Martin, Jr..

^[3]
Rollo, p. 77.

^[4]
Exhibit “1”, Records/Index of Exhibits, p. 30.

^[5]
Rollo, pp. 31-32.

^[6]
Exhibit “C”, Records/Index of Exhibits, p. 5.

^[7]
Exhibit “A”, Records/Index of Exhibits, pp. 1-2.

^[8]
Exhibit “B”, Records/Index of Exhibits, p. 3.

^[9]
Exhibit “17-C”, Records/Index of Exhibits, pp. 96-97.

^[10]
Exhibit “B”, Records/Index of Exhibits, p. 4.

^[11]
Exhibit “F”, Records/Index of Exhibits, pp. 11-12.

^[12]
Exhibit “H”, Records/Index of Exhibits, pp. 14-15.

^[13]
Exhibit “G”, Records/Index of Exhibits, p. 13.

^[14]
Exhibit “I”, Records/Index of Exhibits, p. 16.

^[15]
Original Records of Civil Case No. 2880-P, p. 84.

^[16]
Rollo, p. 95.

^[17]
Id., p. 171.

^[18]
Id., p. 172.

^[19]
Good Earth Emporium, Inc. vs. Court of Appeals, 194 SCRA 544 [1991].

^[20]
Philippine Veterans Investment Development Corporation vs. Court of
Appeals, 181 SCRA 678 [1990].

^[21]
Cagayan Valley Enterprises, Inc. vs. Court of Appeals, 179 SCRA 218 [1989].

^[22]
Rollo, p. 89.

^[23]
Exhibit “24”, Records/Index of Exhibits, p. 155.

^[24]
Rollo, p. 74.

^[25]
People vs. Pirreras, 179 SCRA 33 [1989].

^[26]
F. David Enterprises vs. Insular Bank of Asia and America, 191
SCRA 516 [1990].