G.R. No. 129459 September 29, 1998
Lessons Applicable: Definition of a Close Corporation (Corporate Law)
FACTS:
- February 14 1989: San Juan Structural and Steel Fabricators, Inc.'s (San Juan) entered into an agreement with Motorich Sales Corporation (Motorich) for the transfer to it of a parcel of land containing an area of 414 square meters
- San Juan paid the down payment of P100,000, the balance to be paid on or before March 2, 1989
- March 1, 1989: Mr. Andres T. Co, president of San Juan, wrote a letter course through Motorich's broker requesting for a computation of the balance to be paid
- Linda Aduca, who wrote the computation of the balance
- March 2, 1989: San Juan was ready with the amount corresponding to the balance, covered by Metrobank Cashier's Check, payable to Motorich
- they were supposed to meet in the office of San Juan but Motorich's treasurer, Nenita Lee Gruenberg, did not appear
- Motorich refused to execute the Transfer of Rights/Deed of Assignment which is necessary to transfer the certificate of title
- ACL Development Corp. (ACL) is impleaded as a necessary party since Transfer Certificate of Title No. (362909) 2876 is still in its name
- JNM Realty & Development Corp. (JNM) is impleaded as a necessary party in view of the fact that it is the transferor of right in favor of Motorich
- April 6, 1989: ACL and Motorich entered into a Deed of Absolute Sale
- the Registry of Deeds of Quezon City issued a new title in the name of Motorich Sales Corporation, represented by Nenita Lee Gruenberg and Reynaldo L. Gruenberg, under Transfer Certificate of Title No. 3571
- as a result of Nenita Lee Gruenberg and Motorich's bad faith in refusing to execute a formal Transfer of Rights/Deed of Assignment, San Juan suffered moral and nominal damages of P500,000 and exemplary damages of P100,000.00 and P100,000 attorneys fees
- San Juan lost the opportunity to construct a residential building in the sum of P100,000.00 Pesos
- CA affirmed RTC for dismissing
- San Juan argues that the veil of corporate fiction of Motorich should be pierced because it is a close corporation.
- Since "Spouses Reynaldo L. Gruenberg and Nenita R. Gruenberg owned all or almost all or 99.866% to be accurate, of the subscribed capital stock" of Motorich, San Juan argues that Gruenberg needed no authorization from the board to enter into the subject contract.
- being solely owned by the Spouses Gruenberg, the company can treated as a close corporation which can be bound by the acts of its principal stockholder who needs no specific authority
ISSUE: W/N Motorich is a close corp. which does not need to be bound by its principal SH
HELD: NO. petition is hereby DENIED
- Gruenberg, treasurer of Motorich, and Andres Co signed the contract but that cannot bind Motorich, because it never authorized or ratified such sale or even the receipt of the earnest money
- A corporation is a juridical person separate and distinct from its stockholders or members
- San Juan failed to prove otherwise
- The document is a hand-written one, not a corporate receipt, and it bears only Nenita Gruenberg's signature
- GR: acts of corporate officers within the scope of their authority are binding on the corporation. But when these officers exceed their authority, their actions "cannot bind the corporation, unless it has ratified such acts or is estopped from disclaiming them.
- statutorily granted privilege of a corporate veil may be used only for legitimate purposes
- utilized as a shield to commit fraud, illegality or inequity; defeat public convenience; confuse legitimate issues; or serve as a mere alter ego or business conduit of a person or an instrumentality, agency or adjunct of another corporation - none here
Sec. 96. Definition and Applicability of Title. — A close corporation, within the meaning of this Code, is one whose articles of incorporation provide that: (1) All of the corporation's issued stock of all classes, exclusive of treasury shares, shall be held of record by not more than a specified number of persons, not exceeding twenty (20); (2) All of the issued stock of all classes shall be subject to one or more specified restrictions on transfer permitted by this Title; and (3) The corporation shall not list in any stock exchange or make any public offering of any of its stock of any class. Notwithstanding the foregoing, a corporation shall be deemed not a close corporation when at least two-thirds (2/3) of its voting stock or voting rights is owned or controlled by another corporation which is not a close corporation within the meaning of this Code. . . . .
- The articles of incorporation of Motorich Sales Corporation does not contain any provision stated in Sec. 96
- mere ownership by a single stockholder or by another corporation of all or capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate personalities
- A narrow distribution of ownership does not, by itself, make a close corporation
- Even if veil is peice it will then be a sale of conjugal property which Nenita alone could not have effected
- Gruenberg did not represent herself as authorized by Respondent Motorich despite the receipt issued by the former specifically indicating that she was signing on behalf of Motorich
- The amount paid as "earnest money" was not proven to have redounded to the benefit of Motorich
- it was deposited with the account of Aren Commercial c/o Motorich
- Andres Co being a President of San Juan for more than 10 years cannot feign ignorance of the scope of the authority of a corporate treasurer
- However, Nenita Gruenberg should be ordered to return to petitioner the amount she received as earnest money, as "no one shall enrich himself at the expense of another.