Subscriber | No. of shares | Total subscription | Amount paid |
Donnina C. Halley | 35,000 | P 350,000.00 | P87,500.00 |
Roberto V. Cabrera, Jr. | 18,000 | P 180,000.00 | P45,000.00 |
Albert T. Yu | 18,000 | P 180,000.00 | P45,000.00 |
Zenaida V. Yu | 2,000 | P 20,000.00 | P5,000.00 |
izalino C. Vineza | 2,000 | P 20,000.00 | P5,000.00 |
TOTAL | 75,000 | P750,000.00 | P187,500.00 |
Name | Unpaid Shares |
Donnina C. Halley | P 262,500.00 |
Roberto V. Cabrera, Jr. | P135,000.00 |
Albert T. Yu | P135,000.00 |
Zenaida V. Yu | P15,000.00 |
Rizalino C. Viñeza | P15,000.00 |
TOTAL | P 562,500.00 |
Receipt No. | Date | Name | Amount |
217 | November 5, 1987 | Albert T. Yu | P 45,000.00 |
218 | May 13, 1988 | Albert T. Yu | P 135,000.00 |
220 | May 13, 1988 | Roberto V. Cabrera, Jr. | P 135,000.00 |
221 | November 5, 1987 | Roberto V. Cabrera, Jr. | P 45,000.00 |
222 | November 5, 1987 | Zenaida V. Yu | P 5,000.00 |
223 | May 13, 1988 | Zenaida V. Yu | P 15,000.00 |
227 | May 13, 1988 | Donnina C. Halley | P 262,500.00 |
The claim of individual defendants that they have fully paid their subscriptions to defend[a]nt corporation, is not worthy of consideration, because: --
a) in the case of defendants-spouses Albert and Zenaida Yu, it will be noted that the alleged payment made on May 13, 1988 amounting to P135,000.00, is covered by Official Receipt No. 218 (Exh. "2"), whereas the alleged payment made earlier on November 5, 1987, amounting to P5,000.00, is covered by Official Receipt No. 222 (Exh. "3"). This is cogent proof that said receipts were belatedly issued just to suit their theory since in the ordinary course of business, a receipt issued earlier must have serial numbers lower than those issued on a later date. But in the case at bar, the receipt issued on November 5, 1987 has serial numbers (222) higher than those issued on a later date (May 13, 1988). b) The claim that since there was no call by the Board of Directors of defendant corporation for the payment of unpaid subscriptions will not be a valid excuse to free individual defendants from liability. Since the individual defendants are members of the Board of Directors of defendant corporation, it was within their exclusive power to prevent the fulfillment of the condition, by simply not making a call for the payment of the unpaid subscriptions. Their inaction should not work to their benefit and unjust enrichment at the expense of plaintiff.
Assuming arguendo that the individual defendants have paid their unpaid subscriptions, still, it is very apparent that individual defendants merely used the corporate fiction as a cloak or cover to create an injustice; hence, the alleged separate personality of defendant corporation should be disregarded (Tan Boon Bee & Co., Inc. vs. Judge Jarencio, G.R. No. 41337, 30 June 1988).14
Defendant Business Media, Inc. is a registered corporation (Exhibits "A", "A-1" to "A-9"), and, as appearing from the Articles of Incorporation, individual defendants have the following unpaid subscriptions:The RTC disposed as follows:
Names Unpaid Subscription Donnina C. Halley P262,500.00 Roberto V. Cabrera, Jr. 135.000.00 Albert T. Yu 135,000.00 Zenaida V. Yu 15,000.00 Rizalino V. Vineza 15,000.00 --------------------Total P562,500.00
and it is an established doctrine that subscriptions to the capital stock of a corporation constitute a fund to which creditors have a right to look for satisfaction of their claims (Philippine National Bank vs. Bitulok Sawmill, Inc., 23 SCRA 1366) and, in fact, a corporation has no legal capacity to release a subscriber to its capital stock from the obligation to pay for his shares, and any agreement to this effect is invalid (Velasco vs. Poizat, 37 Phil. 802).
The liability of the individual stockholders in the instant case shall be pro-rated as follows:
Names Amount Donnina C. Halley P149,955.65 Roberto V. Cabrera, Jr. 77,144.55 Albert T. Yu 77,144.55 Zenaida V. Yu 8,579.00 Rizalino V. Vineza 8,579.00 ------------------Total P321,342.7515
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendants, ordering defendants to pay to plaintiff the amount of P291,342.76, as principal, with interest thereon at 20% per annum, from date of default, until fully paid, plus P30,000.00 as attorney's fees, plus costs of suit.
Defendants' counterclaims are ordered dismissed for lack of merit.
SO ORDERED.16
I.
THE TRIAL COURT ERRED IN HOLDING APPELLANTS-STOCKHOLDERS LIABLE FOR THE LIABILITIES OF THE DEFENDANT CORPORATION.II.
ASSUMING ARGUENDO THAT APPELLANTS MAY BE LIABLE TO THE EXTENT OF THEIR UNPAID SUBSCRIPTION OF SHARES OF STOCK, IF ANY, THE TRIAL COURT NONETHELESS ERRED IN NOT FINDING THAT APPELLANTS-STOCKHOLDERS HAVE, AT THE TIME THE SUIT WAS FILED, NO SUCH UNPAID SUBSCRIPTIONS.
I.
THE RTC ERRED IN REFUSING TO GIVE CREDENCE AND WEIGHT TO DEFENDANTS-APPELLANTS SPOUSES ALBERT AND ZENAIDA YU'S EXHIBITS 2 AND 3 DESPITE THE UNREBUTTED TESTIMONY THEREON BY APPELLANT ALBERT YU AND THE ABSENCE OF PROOF CONTROVERTING THEM.II.
THE RTC ERRED IN HOLDING DEFENDANTS-APPELLANTS SPOUSES ALBERT AND ZENAIDA YU PERSONALLY LIABLE FOR THE CONTRACTUAL OBLIGATION OF BUSINESS MEDIA PHILS., INC. DESPITE FULL PAYMENT BY SAID DEFENDANTS-APPELLANTS OF THEIR RESPECTIVE SUBSCRIPTIONS TO THE CAPITAL STOCK OF BUSINESS MEDIA PHILS., INC.
I.
IT IS GRAVE ERROR ON THE PART OF THE COURT A QUO TO APPLY THE DOCTRINE OF PIERCING THE VEIL OF CORPORATE PERSONALITY IN ABSENCE OF ANY SHOWING OF EXTRA-ORDINARY CIRCUMSTANCES THAT WOULD JUSTIFY RESORT THERETO.II.
IT IS GRAVE ERROR ON THE PART OF THE COURT A QUO TO RULE THAT INDIVIDUAL DEFENDANTS ARE LIABLE TO PAY THE PLAINTIFF-APPELLEE'S CLAIM BASED ON THEIR RESPECTIVE SUBSCRIPTION. NOTWITHSTANDING OVERWHELMING EVIDENCE SHOWING FULL SETTLEMENT OF SUBSCRIBED CAPITAL BY THE INDIVIDUAL DEFENDANTS.
Settled is the rule that when the veil of corporate fiction is used as a means of perpetrating fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the circumvention of statutes, the achievements or perfection of monopoly or generally the perpetration of knavery or crime, the veil with which the law covers and isolates the corporation from the members or stockholders who compose it will be lifted to allow for its consideration merely as an aggregation of individuals (First Philippine International Bank vs. Court of Appeals, 252 SCRA 259). Moreover, under this doctrine, the corporate existence may be disregarded where the entity is formed or used for non-legitimate purposes, such as to evade a just and due obligations or to justify wrong (Claparols vs. CIR, 65 SCRA 613).
In the case at bench, it is undisputed that BMPI made several orders on credit from appellee PRINTWELL involving the printing of business magazines, wrappers and subscription cards, in the total amount of P291,342.76 (Record pp. 3-5, Annex "A") which facts were never denied by appellants' stockholders that they owe appellee the amount of P291,342.76. The said goods were delivered to and received by BMPI but it failed to pay its overdue account to appellee as well as the interest thereon, at the rate of 20% per annum until fully paid. It was also during this time that appellants stockholders were in charge of the operation of BMPI despite the fact that they were not able to pay their unpaid subscriptions to BMPI yet greatly benefited from said transactions. In view of the unpaid subscriptions, BMPI failed to pay appellee of its liability, hence appellee in order to protect its right can collect from the appellants' stockholders regarding their unpaid subscriptions. To deny appellee from recovering from appellants would place appellee in a limbo on where to assert their right to collect from BMPI since the stockholders who are appellants herein are availing the defense of corporate fiction to evade payment of its obligations.17
It is an established doctrine that subscription to the capital stock of a corporation constitute a fund to which creditors have a right to look up to for satisfaction of their claims, and that the assignee in insolvency can maintain an action upon any unpaid stock subscription in order to realize assets for the payment of its debts (PNB vs. Bitulok Sawmill, 23 SCRA 1366).
Premised on the above-doctrine, an inference could be made that the funds, which consists of the payment of subscriptions of the stockholders, is where the creditors can claim monetary considerations for the satisfaction of their claims. If these funds which ought to be fully subscribed by the stockholders were not paid or remain an unpaid subscription of the corporation then the creditors have no other recourse to collect from the corporation of its liability. Such occurrence was evident in the case at bar wherein the appellants as stockholders failed to fully pay their unpaid subscriptions, which left the creditors helpless in collecting their claim due to insufficiency of funds of the corporation. Likewise, the claim of appellants that they already paid the unpaid subscriptions could not be given weight because said payment did not reflect in the Articles of Incorporations of BMPI that the unpaid subscriptions were fully paid by the appellants' stockholders. For it is a rule that a stockholder may be sued directly by creditors to the extent of their unpaid subscriptions to the corporation (Keller vs. COB Marketing, 141 SCRA 86).
Moreover, a corporation has no power to release a subscription or its capital stock, without valuable consideration for such releases, and as against creditors, a reduction of the capital stock can take place only in the manner and under the conditions prescribed by the statute or the charter or the Articles of Incorporation. (PNB vs. Bitulok Sawmill, 23 SCRA 1366).18
Finally, appellants SPS YU, argued that the fact of full payment for the unpaid subscriptions was incontrovertibly established by competent testimonial and documentary evidence, namely - Exhibits "1", "2", "3" & "4", which were never disputed by appellee, clearly shows that they should not be held liable for payment of the said unpaid subscriptions of BMPI.
The reliance is misplaced.
We are hereby reproducing the contents of the above-mentioned exhibits, to wit:
Exh: "1" - YU - Official Receipt No. 217 dated November 5, 1987 amounting to P45,000.00 allegedly representing the initial payment of subscriptions of stockholder Albert Yu.
Exh: "2" - YU - Official Receipt No. 218 dated May 13, 1988 amounting to P135,000.00 allegedly representing full payment of balance of subscriptions of stockholder Albert Yu. (Record p. 352).
Exh: "3" - YU - Official Receipt No. 222 dated November 5, 1987 amounting to P5,000.00 allegedly representing the initial payment of subscriptions of stockholder Zenaida Yu.
Exh: "4" - YU - Official Receipt No. 223 dated May 13, 1988 amounting to P15,000.00 allegedly representing the full payment of balance of subscriptions of stockholder Zenaida Yu. (Record p. 353).
Based on the above exhibits, we are in accord with the lower court's findings that the claim of the individual appellants that they fully paid their subscription to the defendant BMPI is not worthy of consideration, because, in the case of appellants SPS. YU, there is an inconsistency regarding the issuance of the official receipt since the alleged payment made on May 13, 1988 amounting to P135,000.00 was covered by Official Receipt No. 218 (Record, p. 352), whereas the alleged payment made earlier on November 5, 1987 amounting to P5,000.00 is covered by Official Receipt No. 222 (Record, p. 353). Such issuance is a clear indication that said receipts were belatedly issued just to suit their claim that they have fully paid the unpaid subscriptions since in the ordinary course of business, a receipt is issued earlier must have serial numbers lower than those issued on a later date. But in the case at bar, the receipt issued on November 5, 1987 had a serial number (222) higher than those issued on May 13, 1988 (218). And even assuming arguendo that the individual appellants have paid their unpaid subscriptions, still, it is very apparent that the veil of corporate fiction may be pierced when made as a shield to perpetuate fraud and/or confuse legitimate issues. (Jacinto vs. Court of Appeals, 198 SCRA 211).19
I.
THE COURT OF APPEALS ERRED IN AFFIRMING IN TOTO THE DECISION THAT DID NOT STATE THE FACTS AND THE LAW UPON WHICH THE JUDGMENT WAS BASED BUT MERELY COPIED THE CONTENTS OF RESPONDENT'S MEMORANDUM ADOPTING THE SAME AS THE REASON FOR THE DECISIONII.
THE COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE REGIONAL TRIAL COURT WHICH ESSENTIALLY ALLOWED THE PIERCING OF THE VEIL OF CORPORATE FICTIONIII.
THE HONORABLE COURT OF APPEALS ERRED IN APPLYING THE TRUST FUND DOCTRINE WHEN THE GROUNDS THEREFOR HAVE NOT BEEN SATISFIED.
In the case at bench, it is undisputed that BMPI made several orders on credit from appellee PRINTWELL involving the printing of business magazines, wrappers and subscription cards, in the total amount of P291,342.76 (Record pp. 3-5, Annex "A") which facts were never denied by appellants' stockholders that they owe(d) appellee the amount of P291,342.76. The said goods were delivered to and received by BMPI but it failed to pay its overdue account to appellee as well as the interest thereon, at the rate of 20% per annum until fully paid. It was also during this time that appellants stockholders were in charge of the operation of BMPI despite the fact that they were not able to pay their unpaid subscriptions to BMPI yet greatly benefited from said transactions. In view of the unpaid subscriptions, BMPI failed to pay appellee of its liability, hence appellee in order to protect its right can collect from the appellants stockholders regarding their unpaid subscriptions. To deny appellee from recovering from appellants would place appellee in a limbo on where to assert their right to collect from BMPI since the stockholders who are appellants herein are availing the defense of corporate fiction to evade payment of its obligations.31
xxx rule that the property of a corporation is a trust fund for the payment of creditors, but such property can be called a trust fund 'only by way of analogy or metaphor.' As between the corporation itself and its creditors it is a simple debtor, and as between its creditors and stockholders its assets are in equity a fund for the payment of its debts.32
It is established doctrine that subscriptions to the capital of a corporation constitute a fund to which creditors have a right to look for satisfaction of their claims and that the assignee in insolvency can maintain an action upon any unpaid stock subscription in order to realize assets for the payment of its debts. (Velasco vs. Poizat, 37 Phil., 802) xxx35
Settled is the rule that payment must be made in legal tender. A check is not legal tender and, therefore, cannot constitute a valid tender of payment. Since a negotiable instrument is only a substitute for money and not money, the delivery of such an instrument does not, by itself, operate as payment. Mere delivery of checks does not discharge the obligation under a judgment. The obligation is not extinguished and remains suspended until the payment by commercial document is actually realized.
To establish their defense, the respondents therefore had to present proof, not only that they delivered the checks to the petitioner, but also that the checks were encashed. The respondents failed to do so. Had the checks been actually encashed, the respondents could have easily produced the cancelled checks as evidence to prove the same. Instead, they merely averred that they believed in good faith that the checks were encashed because they were not notified of the dishonor of the checks and three years had already lapsed since they issued the checks.
Because of this failure of the respondents to present sufficient proof of payment, it was no longer necessary for the petitioner to prove non-payment, particularly proof that the checks were dishonored. The burden of evidence is shifted only if the party upon whom it is lodged was able to adduce preponderant evidence to prove its claim.
Endnotes:
1 Penned by Associate Justice Mercedes Gozo-Dadole, with Associate Justices Salvador J. Valdez, Jr. and Amelita G. Tolentino concurring, rollo, pp. 36-49.
2 Entitled Printwell, Inc. v. Business Media Phils., Inc., Donnina C. Halley and Simon Halley, Roberto V. Cabrera, Jr., Albert T. Yu, Zenaida V. Yu, and Rizalino C. Vineza, rollo, pp. 222-230.
3 Id., p. 109.
4 Records, pp. 6-7.
5 Id., pp. 12-16.
6 Id., pp. 25-28.
7 Id., p. 253.
8 Id., p. 254.
9 Id., p. 255.
10 Id., pp. 256-259.
11 Id., pp. 260-265.
12 Id., pp. 266-272.
13 Id., pp. 273-276.
14Id., pp. 369-370.
15Id., pp. 368-369
16 Records, p. 371.
17 Rollo, p. 45.
18 Id., pp. 46-47.
19Rollo, pp. 47-49.
20 Section 14. No decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based.
xxx
21 Section 1. Rendition of judgments and final orders.--A judgment or final order determining the merits of the case shall be in writing personally and directly prepared by the judge, stating clearly and distinctly the facts and the law on which it is based, signed by him, and filed with the clerk of the court.
22 G.R. No. 81006, May 12, 1989, 173 SCRA 324.
23 Rollo, p. 23.
24 See, for instance, Bank of the Philippine Islands v. Leobrera, G.R. No. 137147, January 29, 2002, 375 SCRA 81, 86 (where the Court declared that although it was not good practice, there was nothing illegal in the act of the trial court completely copying the memorandum submitted by a party provided that the decision clearly and distinctly stated sufficient findings of fact and the law on which it was based).
25 Rollo, p. 55.
26 Section 2, Corporation Code; Article 44 (3), Civil Code; Francisco Motors Corporation v. Court of Appeals, G.R. No. 100812, June 25, 1999, 309 SCRA 72, 82.
27 Prudential Bank v. Alviar, G.R. No. 150197, July 28, 2005, 464 SCRA 353, 362; Martinez v. Court of Appeals, G.R. No. 131673, September 10, 2004, 438 SCRA 130, 149-150.
28 Light Rail Transit Authority v. Venus, Jr., G.R. No. 163782, March 24, 2006, 485 SCRA 361, 372;R&E Transport, Inc. v. Latag, G.R. No. 155214, February 13, 2004, 422 SCRA 698; Secosa v. Heirs of Erwin Suarez Francisco, G.R. No. 160039, June 29, 2004, 433 SCRA 273;Gochan v. Young, G.R. No. 131889, March 12, 2001, 354 SCRA 207, 222; Development Bank of the Philippines v. Court of Appeals, G.R. No. 110203, May 9, 2001, 357 SCRA 626; Del Rosario v. National Labor Relations Commission, G.R. No. 85416, July 24, 1990, 187 SCRA 777, 780.
29 Solidbank Corporation v. Mindanao Ferroalloy Corporation, G.R. No. 153535, July 28, 2005, 464 SCRA 409, 424-425; Construction & Development Corporation of the Philippines v. Cuenca, G.R. No. 163981, August 12, 2005, 466 SCRA 714, 727; Matuguina Integrated Wood Products, Inc. v. Court of Appeals, G.R. No. 98310, October 24, 1996, 263 SCRA 490, 509.
30 Francisco Motors Corporation v. Court of Appeals, supra, note 26.
31 Rollo, p. 45.
32 42A, Words and Phrases, Trust Fund Doctrine, p. 445, citing McIver v. Young Hardware Co., 57 S.E. 169, 171, 144 N.C. 478, 119 Am. St. Rep. 970; Gallagher v. Asphalt Co. of America, 55 A. 259, 262, 65 N.J. Eq. 258.
33 3 Mason 308, Fed Cas. No. 17, 944.
34 44 Phil 469 (1923).
35 Id., p. 470.
36 Villanueva, Philippine Corporate Law (2001), pp. 558, citing Chicago Rock Island & Pac. R.R. Co. v. Howard, 7 Wall., 392, 19 L. Ed. 117; Sawyer v. Hoag, 17 Wall 610, 21 L. Ed. 731; and Pullman v. Upton, 96 U.S. 328, 24 L. Ed. 818.
37 Velasco v. Poizat, 37 Phil 802, 808 (1918).
38 Philippine Trust v. Rivera, supra, note 34, pp. 470-471.
39 Fogg v. Blair, 139 US 118 (1891).
40 See Velasco v. Poizat, 37 Phil 802, 806 (1918).
41 Tierney v. Ledden, 121 NW 1050.
42 Alonzo v. San Juan, G.R. No. 137549, February 11, 2005, 451 SCRA 45, 55-56; Union Refinery Corporation v. Tolentino, Sr., G.R. No. 155653, September 30, 2005, 471 SCRA 613, 621.
43 Commissioner of Internal Revenue v. Manila Mining Corporation, G.R. No. 153204, August 31, 2005, 468 SCRA 571, 590.
44 Philippine National Bank v. Court of Appeals, G.R. No. 116181, April 17, 1996, 256 SCRA 491, 335-336; Towne & City Development Corporation v. Court of Appeals, G.R. No. 135043, July 14, 2004, 434 SCRA 356, 361-362.
45 Art. 1232, Civil Code.
46 Philippine Airlines, Inc. v. Court of Appeals, G.R. No. 49188, January 30, 1990, 181 SCRA 557, 568.
47 Art. 1249, Civil Code.
48 G.R. No. 176664, July 21, 2008, 559 SCRA 207, 217-219 (underscoring supplied for emphasis).
49 See TSN dated November 6, 1991, p. 4.
50 TSN dated November 6, 1991, p. 4.
51 Bitong v. Court of Appeals (Fifth Division), G.R. No. 123553, July 13, 1998, 292 SCRA 503, 523.
52 Lanuza v. Court of Appeals, G.R. No. 131394, March 28, 2005, 454 SCRA 54, 67.
53 Edward A. Keller & Co., Ltd., v. COB Group Marketing, Inc., G.R. No. L-68907, January 16, 1986, 141 SCRA 86, 93 citing Vda. De Salvatierra v. Hon. Garlitos etc, and Refuerzo, 103 Phil, 757, 763 (1958).
54 See Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, July 12, 1994, 234 SCRA 78.
55 Bunyi v. Factor, G.R. No. 172547, June 30, 2009, 591 SCRA 350, 363; Lapanday Agricultural and Development Corporation (LADECO) v. Angala, G.R. No. 153076, June 21, 2007, 525 SCRA 229; Pajuyo v. Court of Appeals, G.R. No. 146364, June 3, 2004, 430 SCRA 492, 524.