GR 100812; (June, 1999) (Digest)
G.R. No. 100812 June 25, 1999
FRANCISCO MOTORS CORPORATION, petitioner, vs. COURT OF APPEALS and SPOUSES GREGORIO and LIBRADA MANUEL, respondents.
FACTS
Petitioner Francisco Motors Corporation filed a complaint against respondents Spouses Gregorio and Librada Manuel to recover sums representing the unpaid balance for a jeep body and repair costs. In their Answer, the respondents interposed a permissive counterclaim. Gregorio Manuel alleged that, while serving as Assistant Legal Officer for the corporation, he rendered unpaid legal services to the individual members of the Francisco family (who were incorporators, directors, and officers of the petitioner) in an intestate estate proceeding. The trial court ruled in favor of the petitioner on the main claim but also granted the counterclaim, ordering the corporation to pay Manuel P50,000 for attorney’s fees. The Court of Appeals affirmed this decision.
ISSUE
The primary issue is whether the corporate petitioner can be held liable for the unpaid attorney’s fees for legal services rendered by Gregorio Manuel to the individual members of the Francisco family in their personal capacity.
RULING
The Supreme Court reversed the Court of Appeals’ decision holding the corporation liable. The legal logic is anchored on the fundamental principle of separate corporate personality. A corporation has a legal personality distinct and separate from its stockholders, directors, and officers. The obligation for attorney’s fees arose from a contract for legal services between Gregorio Manuel and the individual family members concerning the settlement of their mother’s estate. This was a personal transaction of the heirs, not a corporate undertaking of Francisco Motors Corporation.
The Court rejected the application of the doctrine of piercing the corporate veil. This doctrine is an exception applied only when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime. No such justifying circumstances were present here. The mere fact that the individuals who incurred the debt were also the corporation’s incorporators is insufficient to disregard their separate juridical personalities. To hold the corporation liable for the personal debts of its stockholders would unjustly violate the principle of limited liability. Consequently, the corporation was not the real party-in-interest for the counterclaim. The claim for attorney’s fees should be pursued against the concerned family members in their personal capacity.