Remo Jr v. IAC – G.R. No. L-67626 April 18, 1989

Fact:
The board of directors of AKRON, the Petitioner, Coprada, and others adopted a resolution authorizing the corporation to purchase 13 trucks with the Private respondent on credit pending approval of a bank loan. Side agreement was also made on the terms of payment. Promissory note was issued by Coprada in favor of Akron stating that the balance shall be paid upon the approval of the bank loan. However, after the lapse of the agreed payment date, respondent tried to collect from AKRON with Coprada which it made multiple promises to pay but failed to comply. Respondent filed a complaint against the board of directors of AKRON in the CFI for the return of the trucks or payment of the obligation. In the meanwhile, petitioner sold all his shares in Akron to Coprada. It also appears that Akron amended its articles of incorporation thereby changing its name to Akron Transport International, Inc. which assumed the liability of Akron to private respondent.

CFI ruled in favor of the Respondent and ordered them to pay the amount of the trucks with legal interest. A motion for new trial filed by petitioner was denied so he appealed to the then Intermediate Appellate Court (IAC) wherein in due course a decision was rendered setting aside the said decision as far as petitioner is concerned. However, upon a motion for reconsideration filed by private respondent, the IAC, in a resolution set aside the previous decision. The appellate court entered another decision affirming the appealed decision of the trial court, with costs against petitioner. Hence this petition.

Issue:
Whether the Petitioner may be held liable for the act of the Corporation and under the doctrine of piercing the veil of corporate fiction?

Held:
No, the corporate fiction or the notion of legal entity may be disregarded when it “is used to defeat public convenience, justify wrong, protect fraud, or defend crime” in which instances “the law will regard the corporation as an association of persons, or in case of two corporations, will merge them into one.” The corporate fiction may also be disregarded when it is the “mere alter ego or business conduit of a person.” The environmental facts of this case show that there is no cogent basis to pierce the corporate veil of Akron and hold petitioner personally liable for its obligation to private respondent. While it is true that petitioner was still a member of the board of directors of Akron and that he participated in the adoption of a resolution authorizing the purchase, it does not appear that said resolution was intended to defraud anyone. It was Coprada, President and Chairman of Akron, who negotiated with said respondent for the purchase of 13 cargo trucks. It was Coprada who signed a promissory note. The word “WE’ in the said promissory note must refer to the corporation which Coprada represented in the execution of the note and not its stockholders or directors. Petitioner did not sign the said promissory note so he cannot be personally bound thereby.

Thus, if there was any fraud or misrepresentation that was foisted on private respondent in that there was a forthcoming loan from the DBP when it fact there was none, it is Coprada who should account for the same and not petitioner.

There is the fact that petitioner sold his shares in Akron to Coprada during the pendency of the case. Since petitioner has no personal obligation to private respondent, it is his inherent right as a stockholder to dispose of his shares of stock anytime he so desires.

If the private respondent is the victim of fraud in this transaction, it has not been clearly shown that petitioner had any part or participation in the perpetration of the same. Fraud must be established by clear and convincing evidence. If at all, the principal character on whom fault should be attributed is Feliciano Coprada, the President of Akron, whom private respondent dealt with personally all through out. Fortunately, private respondent obtained a judgment against him from the trial court and the said judgment has long been final and executory.