G.R. No. 191525, December 13, 2017
International Academy of Management and Economics (I/AME) vs. Litton and Company, Inc.
FACTS
Litton and Company filed an unlawful detainer case against its lessee, Atty. Emmanuel T. Santos, for rental arrears and unpaid realty taxes. The Metropolitan Trial Court (MeTC) ruled in Litton’s favor, ordering Santos to vacate and pay monetary awards. After a revival of judgment, the decision became final. To execute the judgment, the sheriff levied upon a Makati property covered by TCT No. 187565, registered in the name of the petitioner corporation, I/AME. The title was annotated to indicate the levy was only up to Santos’s share. I/AME moved to lift the annotation, arguing it had a separate juridical personality from Santos and its property should not answer for his personal liabilities.
The MeTC initially denied but later granted I/AME’s motion. Litton appealed to the Regional Trial Court (RTC), which reinstated the denial. I/AME then filed a petition with the Court of Appeals (CA), which affirmed the RTC. The CA found grounds to pierce the corporate veil, noting that Santos, as President, signed a deed of sale for the property in 1979 on behalf of I/AME, a corporation not organized until 1985. The property was transferred to I/AME during the pendency of Litton’s appeal for revival of judgment, and the title was issued only in 1993, years after the sale and incorporation.
ISSUE
Whether the Court of Appeals erred in affirming the piercing of I/AME’s corporate veil, thereby subjecting its property to execution for Santos’s personal debt, and whether this constituted a denial of due process.
RULING
The Supreme Court denied the petition and upheld the piercing of the corporate veil. The Court emphasized that the determination of circumstances warranting the piercing of the corporate veil is a question of fact. In a Rule 45 petition, only questions of law are reviewable, and factual findings of the lower courts, when affirmed by the CA, are generally conclusive. The Court found no reason to deviate from this rule, as the MeTC, RTC, and CA were unanimous in their factual conclusions.
The legal logic is that while a corporation enjoys a separate juridical personality, this privilege is not absolute and cannot be used for fraudulent, unfair, or illegal purposes. Piercing the veil is justified when the corporate fiction is used to evade an existing obligation, perpetrate fraud, or when the corporation is merely an alter ego of an individual. The lower courts’ findings established that Santos utilized I/AME as a shield to insulate the Makati property from execution. The anomalous circumstances—including the deed of sale predating corporate existence, the transfer during litigation, and the delayed titling—collectively demonstrated that I/AME was a mere alter ego. Thus, applying the doctrine to hold the corporate property liable for Santos’s debt was proper to prevent a miscarriage of justice. The claim of denial of due process was unfounded, as I/AME was afforded full opportunity to be heard through its motions and petitions in the execution proceedings.