SPS. PEDRO AND FLORENCIA VIOLAGO vs.

BA FINANCE
CORPORATION and AVELINO VIOLAGO, G.R. No. 158262, July
21, 2008.
VELASCO, JR., J.:
FACTS:
Respondent Avelino, President of VMSC, offered to sell a car to
Petitioner Spouses Violagos through monthly instalments to BA
Finance Corp., which financed the balance of the purchase price of the
said car. By virtue of said agreement, Spouses Violagos signed a
promissory note under which they bound themselves to pay jointly and
severally to the order of VMSC, which note the latter, through Avelino,
endorsed to BA Finance without recourse. However, the Spouses were
unaware that the same car had already been sold in 1982 to
Esmeraldo, and registered the same to the latters name. Further,
despite the spouses demand for the car, there was no delivery of the
car. Thus, Pedro did not pay any monthly amortization to BA Finance.
Subsequently, BA Finance filed with RTC a complaint against the
Spouses, and the court ordered a writ of replevin in favour of BA
Finance. However, on appeal, the CA nullified RTCs order. The
spouses subsequently filed a third party complaint against Avelino on
the ground that he must be held liable to them in the event that they
be held liable to BA Finance. Avelino opposed, on the other hand, that
he was never a party to the transaction personally, but VMSC.
ISSUE:
Whether the veil of corporate entity may be invoked and
sustained despite the fraud and deception of Avelino.
RULING:
No. It is a fundamental principle of corporation law that a
corporation is an entity separate and distinct from its stockholders
and from other corporations to which it may be connected. But, this
separate and distinct personality of a corporation is merely a fiction
created by law for convenience and to promote justice. So, when the
notion of separate juridical personality is used to defeat public
convenience, justify wrong, protect fraud or defend crime, or is used

as a device to defeat the labor laws, this separate personality of the

corporation may be disregarded or the veil of corporate fiction
pierced.

The fact that VMSC was not included as defendant in

petitioners third party complain does not preclude recovery by

petitioners from Avelino, neither would such non- inclusion constitute
a bar to the application of the piercing-of-the-corporate-veil doctrine.
Avelino committed fraud in selling the vehicle to petitioners, a vehicle
that was previously sold to a third person, Esmeraldo. Avelino clearly
defrauded petitioners. He cannot now hide behind the separate
corporate personality of VMSC to escape from liability for the amount
adjudged by the trial court in favour of petitioners.
CLAUDE P. BAUTISTA vs. AUTO PLUS TRADERS, INCORPORATED
and COURT OF APPEALS (Twenty-First Division), G.R. No. 166405,
August 6, 2008.
QUISUMBING, J.:
FACTS:
Petitioner Bautista, President of Cruiser Bus Lines Corp.,
purchased various spare parts from private respondent Auto Plus
Traders, and issued two postdated checks to cover his purchases. The
checks

were

subsequently

dishonored. Private

respondent

then

executed an affidavit-complaint for violation of Batas Pambansa Blg.

22 against petitioner. The court ruled in favour of respondent, and the
subsequent motion for reconsiderations and appeal of petitioner were
denied. Petitioner now comes before the Court, raising the sole issue
of whether the Court of Appeals erred in upholding the RTCs ruling
that petitioner, as an officer of the corporation, is personally and
civilly liable to the private respondent for the value of the two checks.
Private respondent counters that petitioner should be held personally
liable for both checks. Private respondent alleged that petitioner
issued two postdated checks: a personal check in his name for the
amount of P151,200 and a corporation check under the account of
Cruiser Bus Lines.
ISSUE:

Whether the Court of Appeals erred in upholding the RTCs

ruling that petitioner, as an officer of the corporation, is personally
and civilly liable to the private respondent for the value of the two
checks.
RULING:
Yes. The appellate court in error for affirming the decision of
the RTC holding petitioner liable for the value of the checks
considering that petitioner was acquitted of the crime charged and
that the debts are clearly corporate debts for which only Cruiser Bus
Lines and Transport Corporation should be held liable. Juridical
entities have personalities separate and distinct from its officers and
the persons composing it. Generally, the stockholders and officers are
not personally liable for the obligations of the corporation except only
when the veil of corporate fiction is being used as a cloak or cover for
fraud or illegality, or to work injustice. These situations, however, do
not exist in this case. The evidence shows that it is Cruiser Bus Lines
and Transport Corporation that has obligations to Auto Plus Traders,
Inc. for tires. There is no agreement that petitioner shall be held liable
for the corporations obligations in his personal capacity. Hence, he
cannot be held liable for the value of the two checks issued in
payment for the corporations obligation.
STA. MONICA INDUSTRIAL AND DEVELOPMENT
CORPORATION vs. THE DEPARTMENT OF AGRARIAN REFORM
REGIONAL DIRECTOR, ET AL., G.R. No. 164846, June 18, 2008.
REYES, R.T., J.:
FACTS:
Trinidad, owner of the subject landholdings, entered into a
leasehold contract with De Guzman, the agricultural leasehold tenant
thereof. By virtue of said contract, the latter was issued a Certificate
of Land Transfer on July 22, 1981. Desiring to have an emancipation
patent over the land under his tillage, De Guzman filed a petition for
the issuance of the same with the Office of the Regional Director (RD)

of the DAR, which the latter favourably granted to De Guzman after

notifying Trinidad of the Notice of Coverage and due proceedings.
However, Trinidad filed an MR but the same was denied. After a year,
petitioner Sta. Monica moved for certiorari with the CA assailing that
it was denied due process of law for it was not notified through a
notice of coverage of the previous proceedings conducted by the RD.
Sta. Monica posited that it is the owner of the said landholding
granted to De Guzman by virtue of a contract of sale entered into by it
with Trinidad. The CA denied the petition on the ground that the RD
Order has already attained finality and that Sta. Monica was not
denied due process owing to the fact that Trinidad is a treasurer of
Sta. Monica.
ISSUE:
Whether the ruling of the CA is contrary to law and existing
jurisprudence.
RULING:
No. The Court finds that the sale between Trinidad and Sta.
Monica was a mere ruse to frustrate the implementation of the
agrarian law. First, the sale to Sta. Monica is prohibited. P.D. No. 27,
and Sta. Monica is owned and controlled by Trinidad and her family.
Records show that Trinidad, her husband and two sons own more than
98% of the outstanding capital stock of Sta. Monica. They are all
officers of the corporation. Trinidad and her family exercise absolute
control of the corporate affairs of Sta. Monica. As owners of 98% of
the outstanding capital stock, they are the beneficial owners of all the
assets of the company, including the agricultural land sold by Trinidad
to Sta. Monica. Considering that Trinidad remained to be the true and
legal owner of the agricultural land, there is no need for another
notice of coverage to be sent or furnished to Sta. Monica. At the very
least, the notice to her is already notice to Sta. Monica because the
corporation acted as a mere conduit of Trinidad. The CA correctly
dismissed the petition of Sta. Monica to annul the orders of the

Regional Director placing the agricultural land of Trinidad under the

agrarian reform law.