G.R. No. 91889, August 27, 1993.
MANUEL R. DULAY ENTERPRISES, INC., VIRGILIO E. DULAY AND NEPOMUCENO REDOVAN, petitioners, vs. THE HONORABLE COURT OF APPEALS, EDGARDO D. PABALAN, MANUEL A. TORRES, JR., MARIA THERESA V. VELOSO AND CASTRENSE C. VELOSO, respondents.

FACTS

Petitioner Manuel R. Dulay Enterprises, Inc., a close corporation, owned a property known as Dulay Apartment in Pasay City. Through its president, Manuel R. Dulay, the corporation obtained loans for a hotel project. On December 23, 1976, Manuel Dulay, by virtue of a Board Resolution, sold the property to private respondents spouses Maria Theresa and Castrense Veloso for P300,000.00. A Deed of Absolute Sale was executed, and TCT No. 17880 was cancelled, with TCT No. 23225 issued to Maria Theresa Veloso. Subsequently, a Memorandum gave Manuel Dulay until December 9, 1979, to repurchase the property for P200,000.00, but this was not annotated on the title. On December 24, 1976, Maria Veloso mortgaged the property to private respondent Manuel A. Torres for a loan of P250,000.00, which was annotated on the title. Upon her failure to pay, the property was sold at an extrajudicial foreclosure sale to Torres on April 5, 1978. Maria Veloso executed a Deed of Absolute Assignment of the Right to Redeem in favor of Manuel Dulay on July 20, 1978. Neither redeemed the property within the statutory period. Torres consolidated ownership, and TCT No. 24799 was issued to him on April 23, 1979. Torres and his administrator, Edgardo Pabalan, filed an action for recovery of possession against the corporation, Virgilio Dulay, and a tenant. The corporation filed an action for cancellation of the sheriff’s sale and Torres’ title. An ejectment case was also filed against another tenant, with the corporation as intervenor. The Metropolitan Trial Court decided in favor of Pabalan and Torres. The corporation and Virgilio Dulay then filed for annulment of that decision. The three cases were jointly tried, and the Regional Trial Court ruled in favor of private respondents, dismissing the corporation’s petitions and ordering the surrender of possession, accounting of rentals, and payment of damages. The Court of Appeals affirmed the decision.

ISSUE

Whether the Court of Appeals acted with grave abuse of discretion in applying the doctrine of piercing the veil of corporate entity and in upholding the validity of the sale of the corporate property by its president, Manuel R. Dulay, despite alleged defects in the board resolution authorizing the sale.

RULING

The Supreme Court denied the petition and affirmed the decision of the Court of Appeals. The Court held that the corporation is a close corporation, and under Section 101 of the Corporation Code, corporate action taken without a formal board meeting can be deemed valid if all directors have knowledge and do not promptly object. Petitioner Virgilio Dulay, a director, failed to file a written objection after having knowledge of the sale. Furthermore, the doctrine of piercing the corporate veil was correctly applied because the corporation was used as an alter ego by the Dulay family for their personal benefit, and its separate identity was disregarded by the stockholders themselves. The sale was binding on the corporation. The Court also ruled that the foreclosure and subsequent sale to Torres were valid, and as the confirmed owner, Torres had an absolute right to possession of the property after the redemption period expired. The denial of the motion for reconsideration by the appellate court, despite the lack of comment from private respondents, was not an error, as the comment was merely to aid the court and its absence did not preclude resolution.