G.R. No. L-22614; August 29, 1969
RAMIREZ TELEPHONE CORPORATION, petitioner, vs. BANK OF AMERICA, E.F. HERBOSA, THE SHERIFF OF MANILA and THE COURT OF APPEALS, respondents.

FACTS

E.F. Herbosa filed an ejectment suit against Ruben R. Ramirez for unpaid rentals of a building. On October 13, 1950, the Sheriff of Manila served a writ of garnishment on respondent Bank of America, ordering it to hold any funds belonging to Ramirez. The bank replied it held no funds in Ramirez’s personal name. On October 17, 1950, the Sheriff served a second garnishment, specifically levying upon “the interest or participation which the defendant Ruben R. Ramirez may or might have in the deposit of the Ramirez Telephone, Inc.” with the bank. The bank then informed the Sheriff it was holding P2,400.00 from the deposit of petitioner Ramirez Telephone Corporation (of which Ruben R. Ramirez was President and owned 75% of the stock with his wife). The corporation’s deposit was P4,789.53. After a withdrawal of P1,500.00, a check for P2,320.00 issued by the corporation was subsequently dishonored by the bank due to the garnishment. Petitioner corporation sued the bank for damages, claiming the bank knew or should have known that Ramirez had no personal deposit and that the corporation was a separate entity. The Court of First Instance ruled in favor of the corporation. The Court of Appeals reversed, dismissing the complaint and ordering the corporation to pay attorney’s fees to the bank and Herbosa.

ISSUE

Whether the Court of Appeals erred in disregarding the separate corporate personality of Ramirez Telephone Corporation, thereby allowing the garnishment of corporate funds to satisfy the personal debt of its principal stockholder/president, Ruben R. Ramirez.

RULING

No. The Supreme Court affirmed the decision of the Court of Appeals. While a corporation has a personality separate from its stockholders as a general rule, the veil of corporate fiction may be pierced in appropriate cases to achieve justice. The facts, as conclusively found by the Court of Appeals, justified piercing the corporate veil. These facts included: Ruben R. Ramirez, the debtor, was the President and majority stockholder (75% owner) of the petitioner corporation; the corporation’s workshop was established in the building rented by Ramirez; Ramirez paid the rentals using checks from the corporation; and the garnishment was specifically levied upon Ramirez’s interest or participation in the corporate deposit. Under these circumstances, the garnishment was a just act in favor of the creditor Herbosa. The other assigned errors, concerning the common legal representation of the bank and Herbosa and the award of damages, were either factual matters for the Court of Appeals or without merit given the correctness of the appellate court’s main ruling.