ASJ CORPORATION and ANTONIO SAN JUAN vs. SPS. EVANGELISTA

My neph accidentally left his e-cigarette in the cab the other day. That thing cost roughly around 8 thousand bucks so I got bit alarmed.

Called me up and told me what happened. I said "Did you get the plate number?" "I did tito" "The cab name?" "Yup" "GOOD THINKING. Text me the details I'll take it from here". So... the next 5 minutes I was hunting down the damn cab line's address driving down the road listening to the 'ever dependable traffic router and accurately gas consuming' lady of Waze. (but geez.. if I could get an app voice that changes it to the butler Alfred or C3Po I would... 'I believe you have to turn right Master Bruce'... or 'In about 200 meters turn right Luke.... t..t.. I said turn right... right... turn right you neencumpoop!!' LOL). 

Got there talked to the office peeps, took it and shook hands.. not much explaining to do, happened that my neph was already communicating with them beforehand before I reached them people. That's my boy! Tsk.. my neph really knows what to do.

About 3 minutes I was checkin' the damn thing. I didn't know my neph got such exquisite taste he's usually hiphop look at the Versace mark. But my question is how on earth can this thing be so cool when a stick of cigarette is way much cooler to look at between a man's mouth and fingers.

Within in 10 minutes I was parked at an SM lot smoking the damn thing.  "Geez.. this is cool" They even got pandan flavor. And without a doubt the thing looks really good in your hand when you're just chilling out in Starbucks... or whut? Starbooks?  I better get one of these! :)

Anyway. Let's get back to the cases. This is another Corporation Law case. Let's get back to the Doctrine of Piercing the Veil of Corporate Fiction. I like the sound of it. And since we started talking about 'porma' lets talk about chicks.

OVERVIEW:

WHAT ARE THE PROBATIVE FACTORS OF IDENTITY IN JUSTIFYING THE APPLICATION OF THE DOCTRINE OF PIERCING THE VEIL OF CORPORATE  FICTION 

FACTS:

Respondents, Spouses EVANGELISTA runs a poultry business called R.M. Sy Chicks. It’s a large-scale business of buying broiler eggs, hatching them, and selling their hatchlings (chicks) and egg by-products in Bulacan and Nueva Ecija. 

They availed of the hatchery services of petitioner ASJ CORP. for the incubation and hatching of these eggs.  respondents a corporation duly registered in the name of Antonio San Juan and his family.

So Respondents delivered to Petitioners various quantities of eggs at an agreed service fee of 80 centavos per egg, hatched or not. Each delivery was reflected in a Setting Report indicating the records. Service fees were paid upon release of the eggs and by-products to respondents. 

But as  business went along, respondents Evangelista occurred delays on payments which were tolerated by San Juan, who just carried over the balance, in keeping of goodwill with respondents.

Here’s where it all started.

Respondent Evangelista went to the hatchery to pick up the chicks and by-products covered by Setting Report No. 108, but San Juan REFUSED TO RELEASE the same due to respondents failure to settle accrued service fees on several setting reports starting from Setting Report No. 90. Nevertheless, San Juan accepted from Efren 10,245 eggs covered by Setting Report No. 113 and P15,000.00 in cash as partial payment for the accrued service fees.

A lien now is being enforced. 

Evangelista returned to the hatchery to pick up the chicks and by-products covered by Setting Report No. 109, but San Juan again refused to release the same unless respondents fully settle their accounts. In the afternoon of the same day, respondent Maura, with her son Anselmo, tendered P15,000.00 to San Juan, and tried to claim the chicks and by-products. She explained that she was unable to pay their balance because she was hospitalized for an undisclosed ailment. San Juan accepted the P15,000.00, but insisted on the full settlement of respondents accounts before releasing the chicks and by-products. 

Now here’s what aggravated it.

Believing firmly that the total value of the eggs delivered was more than sufficient to cover the outstanding balance, Evangeista promised to settle their accounts only upon proper accounting by San Juan. San Juan disliked the idea and threatened to impound their vehicle and detain them at the hatchery compound if they should come back unprepared to fully settle their accounts with him.

Wait, there’s more.

Respondents directed their errand boy, to pick up the chicks and by-products covered by Setting Report No. 110 and also to ascertain if San Juan was still willing to settle amicably their differences. Unfortunately, San Juan was firm in his refusal and reiterated his threats on respondents. Fearing San Juan’s threats, respondents never went back to the hatchery.

The parties tried to settle amicably their differences before police authorities, but to no avail. 

So now we’re faced with Evangelista filing with the RTC an action for damages based on PETITIONERS RETENTION OF THE CHICKS AND BY-PRODUCTS COVERED BY SETTING REPORT NOS. 108 TO 113 which ruled in favor of Evangelista and made the following findings: 

(1) as of Setting Report No. 107, respondents owed petitionersP102,336.80;

(2) petitioners withheld the release of the chicks and by-products covered by Setting Report Nos. 108-113; and

(3) the retention of the chicks and by-products was unjustified and accompanied by threats and intimidations on respondents.

The RTC DISREGARDED THE CORPORATE FICTION OF ASJ CORP., and held it and San Juan solidarily liable to respondents for actual & moral damages, & attorneys fees, plus interests and costs of suit.  

Both parties appealed to CA. Respondents prayed for an additional actual damages for the cost of other unreturned by-products and another amount as unrealized profits, while petitioners prayed for the reversal of the trial courts entire decision.

CA denied both appeals for lack of merit and affirmed the RTC decision, with the slight modification of including an award of exemplary damages in favor of respondents.

CA applying the DOCTRINE OF PIERCING THE VEIL OF CORPORATE FICTION, considered ASJ Corp. and San Juan as one entity, after finding that there was no bona fide intention to treat the corporation as separate and distinct from San Juan and his wife Iluminada.  

  

ISSUE:  

First, Did CA err when it PIERCED THE VEIL OF CORPORATE FICTION and held ASJ Corp. and Antonio San Juan as one entity? 

Second, was it proper to hold petitioners solidarily liable to respondents for the payment of P529,644.80 and other damages?

RULING:

(First) The first set is factual. Petitioners seek to establish a set of facts contrary to the factual findings of the trial and appellate courts. However, as well established in our jurisprudence, only errors of law are reviewable by this Court in a petition for review under Rule 45. The trial court, having had the opportunity to personally observe and analyze the demeanor of the witnesses while testifying, is in a better position to pass judgment on their credibility. More importantly, factual findings of the trial court, when amply supported by evidence on record and affirmed by the appellate court, are binding upon this Court and will not be disturbed on appeal. While there are exceptional circumstances when these findings may be set aside, none of them is present in this case.

Furthermore, although no hard and fast rule can be accurately laid down under which the juridical personality of a corporate entity may be disregarded.

THE FOLLOWING PROBATIVE FACTORS OF IDENTITY JUSTIFY THE APPLICATION OF THE DOCTRINE OF PIERCING THE VEIL OF CORPORATE FICTION IN THIS CASE: 

(1) San Juan and his wife own the bulk of shares of ASJ Corp.; 

(2) The lot where the hatchery plant is located is owned by the San Juan spouses; 

(3) ASJ Corp. had no other properties or assets, except for the hatchery plant and the lot where it is located; 

(4) San Juan is in complete control of the corporation; 

(5) There is no bona fide intention to treat ASJ Corp. as a different entity from San Juan; and 

(6) The corporate fiction of ASJ Corp. was used by San Juan to insulate himself from the legitimate claims of respondents, defeat public convenience, justify wrong, defend crime, and evade a corporations subsidiary liability for damages. 

These findings, being purely one of fact, should be respected. We need not assess and evaluate the evidence all over again where the findings of both courts on these matters coincide.

(Second) On the second set of issues, petitioners contend that the retention was justified and did not constitute an abuse of rights since it was respondents who failed to comply with their obligation. Respondents, for their part, aver that all the elements on abuse of rights were present. They further state that despite their offer to partially satisfy the accrued service fees, and the fact that the value of the chicks and by-products was more than sufficient to cover their unpaid obligations, petitioners still chose to withhold the delivery.

The crux of the controversy, in our considered view, is simple enough. WAS PETITIONERS RETENTION OF THE CHICKS AND BY-PRODUCTS ON ACCOUNT OF RESPONDENTS FAILURE TO PAY THE CORRESPONDING SERVICE FEES UNJUSTIFIED?

While the trial and appellate courts had the same decisions on the matter, suffice it to say that a modification is proper.

Worth stressing, petitioners act of withholding the chicks and by-products is entirely different from petitioners unjustifiable acts of threatening respondents.

THE RETENTION HAD LEGAL BASIS; THE THREATS HAD NONE.