GR 36187; (January, 1989) (Digest)
G.R. No. 36187 , January 17, 1989
REYNOLDS PHILIPPINE CORPORATION, petitioner, vs. HON. COURT OF APPEALS and SERG’S PRODUCTS, INC., respondents.
FACTS
Petitioner Reynolds Philippine Corporation filed a collection suit to recover P32,565.62, the unpaid price of aluminum foils and cores sold and delivered. The private respondent, Serg’s Products, Inc., a corporation, denied liability. It asserted that the goods were purchased by a separate entity, “Serg’s Chocolate Products,” a partnership formed by Antonio Goquiolay and Luis Sequia Mendoza. The trial court ruled in favor of Reynolds, holding the corporation liable.
The Court of Appeals reversed the trial court’s decision and dismissed the complaint. The appellate court based its ruling on the documentary evidence, such as sales orders and delivery receipts, which consistently named “Serg’s Chocolate Products” as the purchaser. It concluded that Reynolds had no cause of action against the corporate respondent, Serg’s Products, Inc.
ISSUE
Whether the Court of Appeals erred in dismissing the complaint against Serg’s Products, Inc., thereby resolving the factual question of the identity of the real debtor.
RULING
Yes. The Supreme Court granted the petition, reversed the Court of Appeals, and reinstated the trial court’s judgment. While factual findings of the Court of Appeals are generally conclusive, exceptions apply when its findings contradict those of the trial court, warranting a review of the evidence. Here, the trial court, which directly observed the witnesses, found compelling facts establishing that Serg’s Products, Inc. was the true debtor, notwithstanding the documents bearing the partnership name.
The legal logic centers on the doctrine of piercing the corporate veil to prevent its use as a shield for fraud or to confuse legitimate obligations. The evidence showed that Antonio Goquiolay, president of the corporation, personally ordered and signed for the goods, which were delivered to and used by the corporation’s factory. The partnership “Serg’s Chocolate Products” had a fixed five-year term ending in 1959, and no evidence proved its renewal; thus, it likely ceased to exist as a juridical entity capable of contracting by the time of the transactions. Furthermore, the corporation and the partnership shared the same address and were managed by the same person, Goquiolay, creating a misleading identity that confused creditors. The corporation’s own accountant admitted the corporation was the buyer. These facts, overlooked by the Court of Appeals, demonstrated that the use of the partnership name was a device to evade payment. The corporate fiction cannot be used to defeat public convenience, justify wrong, or perpetrate fraud. Therefore, Serg’s Products, Inc. was correctly held liable for the debt.