G.R. No. L-20886, April 27, 1967
NATIONAL MARKETING CORPORATION (NAMARCO), plaintiff-appellant, vs. ASSOCIATED FINANCE COMPANY, INC., and FRANCISCO SYCIP, defendants. FRANCISCO SYCIP, defendant-appellee.

FACTS

On March 25, 1958, Associated Finance Company, Inc. (ASSOCIATED), through its President Francisco Sycip, entered into an agreement with the National Marketing Corporation (NAMARCO) for an exchange of sugar. ASSOCIATED agreed to deliver 22,516 bags of refined sugar in exchange for NAMARCO’s raw sugar. Pursuant to the agreement, NAMARCO delivered its raw sugar on May 19, 1958. However, ASSOCIATED failed to deliver the refined sugar. Upon NAMARCO’s demand, ASSOCIATED, through Sycip, offered to pay the cash value but at a rate rejected by NAMARCO. NAMARCO then filed an action to recover the value of the raw sugar delivered, liquidated damages, and attorney’s fees. The trial court held ASSOCIATED liable but dismissed the complaint against Sycip. NAMARCO appealed only the dismissal as to Sycip.

ISSUE

Whether Francisco Sycip may be held jointly and severally liable with ASSOCIATED for the obligations arising from the exchange agreement.

RULING

Yes. The Supreme Court reversed the trial court’s dismissal and held Sycip jointly and severally liable with ASSOCIATED. The evidence established that Sycip owned a majority of ASSOCIATED’s capital stock, controlled its affairs, and personally negotiated the contract with false representations that ASSOCIATED possessed the refined sugar ready for delivery, when in fact it was insolvent and unable to comply. By using the corporate fiction to perpetrate fraud, Sycip could not invoke the separate corporate personality doctrine. The Court pierced the corporate veil, finding ASSOCIATED to be Sycip’s mere alter ego, instrumentality, or conduit. Consequently, Sycip was held personally liable for the amounts adjudged against ASSOCIATED: P403,514.28 with legal interest, P80,702.86 as liquidated damages, P5,000.00 as attorney’s fees, and costs.