Republic of the
Supreme Court
Manila
THIRD DIVISION
|
DONNINA C. HALLEY, Petitioner, -versus- PRINTWELL, INC., Respondent. |
G.R. No. 157549 Present: CARPIO
MORALES, Chairperson, BRION, BERSAMIN, VILLARAMA,
JR., and SERENO,
JJ. Promulgated: May 30, 2011 |
x-----------------------------------------------------------------------------------------x
D E C I S I O N
BERSAMIN, J:
Stockholders of a corporation are
liable for the debts of the corporation up to the extent of their unpaid
subscriptions. They cannot invoke the veil of corporate identity as a shield
from liability, because the veil may be lifted to avoid defrauding corporate
creditors.
Weaffirm with modification the decisionpromulgated
on August 14, 2002,[1]whereby the Court of Appeals(CA) upheld
thedecision of the Regional Trial Court, Branch 71, in Pasig City (RTC),[2]ordering
the defendants (including the petitioner)to pay to Printwell, Inc. (Printwell) the
principal sum of P291,342.76 plus interest.
Antecedents
The petitioner
wasan incorporator and original director of Business Media Philippines, Inc.
(BMPI), which, at its incorporation on November 12, 1987,[3]had an
authorized capital stock of P3,000,000.00 divided into 300,000 shares each
with a par value of P10.00,of which 75,000 were initially subscribed, to
wit:
|
Subscriber |
No. of shares |
Total subscription |
Amount paid |
|
Donnina C. Halley |
35,000 |
|
|
|
Roberto V. Cabrera, Jr. |
18,000 |
|
|
|
Albert T. Yu |
18,000 |
|
|
|
Zenaida V. Yu |
2,000 |
|
|
|
Rizalino C. Vineza |
2,000 |
|
|
|
TOTAL |
75,000 |
|
|
Printwellengaged
in commercial and industrial printing.BMPI commissioned Printwell for the printing of the magazine Philippines, Inc. (together with
wrappers and subscription cards) that BMPI published and sold. For that
purpose, Printwell extended 30-day
credit accommodations to BMPI.
In the
period from October 11,
1988 until July 12, 1989, BMPI placedwith Printwell several orders on credit, evidenced
byinvoices and delivery receipts totalingP316,342.76.Considering that BMPI
paidonlyP25,000.00,Printwell suedBMPIon
January 26, 1990 for the collection of the
unpaid balance of P291,342.76 in the RTC.[4]
On February 8, 1990,Printwell amended
thecomplaint in order to implead as defendants all the original stockholders
and incorporators to recover on theirunpaid subscriptions, as follows:[5]
|
Name |
Unpaid Shares |
|
Donnina C. Halley |
|
|
Roberto V.
Cabrera, Jr. |
|
|
Albert T. Yu |
|
|
Zenaida V. Yu |
|
|
Rizalino C. Viñeza |
|
|
TOTAL |
|
The defendants filed a consolidated
answer,[6]averring
that they all had paid their subscriptions in full; that BMPI had a separate
personality from those of its stockholders; thatRizalino C. Viñeza had assigned
his fully-paid up sharesto a certain Gerardo R. Jacinto in 1989; andthat the
directors and stockholders of BMPI had resolved to dissolve BMPI during the
annual meetingheld on February 5, 1990.
To prove payment of their
subscriptions, the defendantstockholderssubmitted in evidenceBMPI official
receipt (OR) no. 217, OR no. 218, OR no. 220,OR no. 221, OR no. 222, OR no. 223,
andOR no. 227,to wit:
|
Receipt No. |
Date |
Name |
Amount |
|
217 |
|
Albert T. Yu |
|
|
218 |
|
Albert T. Yu |
|
|
220 |
|
Roberto V. Cabrera, Jr. |
|
|
221 |
|
Roberto V. Cabrera, Jr. |
|
|
222 |
|
Zenaida V. Yu |
|
|
223 |
|
Zenaida V. Yu |
|
|
227 |
|
Donnina C. Halley |
|
In addition, the stockholderssubmitted
other documentsin evidence, namely:(a)
an audit report dated March 30, 1989 prepared by Ilagan, Cepillo &
Associates (submitted to the SEC and the BIR);[7](b) BMPIbalance sheet[8] and income
statement[9]as of
December 31, 1988; (c) BMPI income
tax return for the year 1988 (stamped “received”
by the BIR);[10](d) journal vouchers;[11](e) cash deposit slips;[12] and(f)Bank of the Philippine Islands (BPI)
savings account passbookin the name of BMPI.[13]
Ruling of the RTC
On
November 3, 1993, the RTC rendereda decision in favor of Printwell, rejecting
the allegation of payment in full of the subscriptions in view of an
irregularity in the issuance of the ORs and observingthat the defendants had
used BMPI’s corporate personality to evade payment and create injustice, viz:
The claim of individual defendants that they have fully paid their subscriptions to defend[a]nt corporation, is not worthy of consideration, because: —
a) in
the case of defendants-spouses Albert and Zenaida Yu, it will be noted that the
alleged payment made on P135,000.00, is covered by Official
Receipt No. 218 (Exh. “2”), whereas the alleged payment made earlier on P5,000.00, is covered by Official Receipt No. 222 (Exh. “3”). This is
cogent proof that said receipts were belatedly issued just to suit their
theory since in the ordinary course of business, a receipt issued earlier
must have serial numbers lower than those issued on a later date. But in
the case at bar, the receipt issued on
b) The claim that since there was no call by the Board of Directors of defendant corporation for the payment of unpaid subscriptions will not be a valid excuse to free individual defendants from liability. Since the individual defendants are members of the Board of Directors of defendantcorporation, it was within their exclusive power to prevent the fulfillment of the condition, by simply not making a call for the payment of the unpaid subscriptions. Their inaction should not work to their benefit and unjust enrichment at the expense of plaintiff.
Assuming arguendo that the individual defendants have paid their unpaid subscriptions, still, it is very apparent that individual defendants merely used the corporate fiction as a cloak or cover to create an injustice; hence, the alleged separate personality of defendant corporation should be disregarded (Tan Boon Bee & Co., Inc. vs. Judge Jarencio, G.R. No. 41337, 30 June 1988).[14]
Applying
the trust fund doctrine, the RTC declared
the defendant stockholders liable to Printwell pro rata, thusly:
Defendant Business Media, Inc. is a registered corporation (Exhibits “A”, “A-1” to “A-9”), and, as appearing from the Articles of Incorporation, individual defendants have the following unpaid subscriptions:
Names Unpaid Subscription
Donnina
C. Halley P262,500.00
Roberto V. Cabrera, Jr. 135.000.00
Albert T. Yu 135,000.00
Zenaida V. Yu 15,000.00
Rizalino V. Vineza 15,000.00
--------------------
Total
P562,500.00
and it is an established doctrine that subscriptions to the capital stock of a corporation constitute a fund to which creditors have a right to look for satisfaction of their claims (Philippine National Bank vs. Bitulok Sawmill, Inc., 23 SCRA 1366) and, in fact, a corporation has no legal capacity to release a subscriber to its capital stock from the obligation to pay for his shares, and any agreement to this effect is invalid (Velasco vs. Poizat, 37 Phil. 802).
The liability of the individual stockholders in the instant case shall be pro-rated as follows:
Names
Amount
Donnina
C. Halley P149,955.65
Roberto V. Cabrera, Jr. 77,144.55
Albert T. Yu 77,144.55
Zenaida V. Yu 8,579.00
Rizalino V. Vineza 8,579.00
------------------
Total
P321,342.75[15]
The RTC disposed as follows:
WHEREFORE,
judgment is hereby rendered in favor of plaintiff and against defendants,
ordering defendants to pay to plaintiff the amount of P291,342.76, as
principal, with interest thereon at 20% per annum, from date of default, until
fully paid, plus P30,000.00 as attorney’s fees, plus costs of suit.
Defendants’ counterclaims are ordered dismissed for lack of merit.
SO ORDERED.[16]
Ruling of the CA
All
the defendants, except BMPI, appealed.
Spouses Donnina and Simon Halley, andRizalinoViñeza
defined the following errors committed by the RTC, as follows:
I.
THE TRIAL COURT ERRED IN HOLDING APPELLANTS-STOCKHOLDERS LIABLE FOR THE LIABILITIES OF THE DEFENDANT CORPORATION.
II.
ASSUMING ARGUENDO THAT APPELLANTS MAY BE LIABLE TO THE EXTENT OF THEIR UNPAID SUBSCRIPTION OF SHARES OF STOCK, IF ANY, THE TRIAL COURT NONETHELESS ERRED IN NOT FINDING THAT APPELLANTS-STOCKHOLDERS HAVE, AT THE TIME THE SUIT WAS FILED, NO SUCH UNPAID SUBSCRIPTIONS.
On
their part, Spouses Albert and Zenaida Yu averred:
I.
THE RTC ERRED IN REFUSING TO GIVE CREDENCE AND WEIGHT TO DEFENDANTS-APPELLANTS SPOUSES ALBERT AND ZENAIDA YU’S EXHIBITS 2 AND 3 DESPITE THE UNREBUTTED TESTIMONY THEREON BY APPELLANT ALBERT YU AND THE ABSENCE OF PROOF CONTROVERTING THEM.
II.
THE RTC ERRED IN HOLDING DEFENDANTS-APPELLANTS SPOUSES ALBERT AND ZENAIDA YU PERSONALLY LIABLE FOR THE CONTRACTUAL OBLIGATION OF BUSINESS MEDIA PHILS., INC. DESPITE FULL PAYMENT BY SAID DEFENDANTS-APPELLANTS OF THEIR RESPECTIVE SUBSCRIPTIONS TO THE CAPITAL STOCK OF BUSINESS MEDIA PHILS., INC.
Roberto V. Cabrera, Jr. argued:
I.
IT IS GRAVE ERROR ON THE PART OF THE COURT A QUO TO APPLY THE DOCTRINE OF PIERCING THE VEIL OF CORPORATE PERSONALITY IN ABSENCE OF ANY SHOWING OF EXTRA-ORDINARY CIRCUMSTANCES THAT WOULD JUSTIFY RESORT THERETO.
II.
IT IS GRAVE ERROR ON
THE PART OF THE COURT A QUO TO RULE THAT INDIVIDUAL DEFENDANTS ARE LIABLE TO
PAY THE PLAINTIFF-APPELLEE’S CLAIM BASED ON THEIR RESPECTIVE SUBSCRIPTION.
NOTWITHSTANDING OVERWHELMING EVIDENCE SHOWING FULL SETTLEMENT OF SUBSCRIBED
CAPITAL BY THE INDIVIDUAL DEFENDANTS.
On
August 14, 2002, the CA affirmed the RTC, holding that the defendants’ resort
to the corporate personality would createan injustice becausePrintwell would thereby
be at a loss against whom it would assert the right to collect, viz:
Settled is the rule that when the veil of corporate fiction is used as a means of perpetrating fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the circumvention of statutes, the achievements or perfection of monopoly or generally the perpetration of knavery or crime, the veil with which the law covers and isolates the corporation from the members or stockholders who compose it will be lifted to allow for its consideration merely as an aggregation of individuals (First Philippine International Bank vs. Court of Appeals, 252 SCRA 259). Moreover, under this doctrine, the corporate existence may be disregarded where the entity is formed or used for non-legitimate purposes, such as to evade a just and due obligations or to justify wrong (Claparols vs. CIR, 65 SCRA 613).
In the case at bench, it is undisputed
that BMPI made several orders on credit from appellee PRINTWELL involving the
printing of business magazines, wrappers and subscription cards, in the total
amount of P291,342.76 (Record pp. 3-5, Annex “A”) which facts were never denied
by appellants’ stockholders that they owe appellee the amount of P291,342.76.
The said goods were delivered to and received by BMPI but it failed to pay its
overdue account to appellee as well as the interest thereon, at the rate of 20%
per annum until fully paid. It was also during this time that appellants
stockholders were in charge of the operation of BMPI despite the fact that they
were not able to pay their unpaid subscriptions to BMPI yet greatly benefited
from said transactions. In view of the unpaid subscriptions, BMPI failed to pay
appellee of its liability, hence appellee in order to protect its right can
collect from the appellants’ stockholders regarding their unpaid subscriptions.
To deny appellee from recovering from appellants would place appellee in a
limbo on where to assert their right to collect from BMPI since the
stockholders who are appellants herein are availing the defense of corporate
fiction to evade payment of its obligations.[17]
Further,
the CA concurred with the RTC on theapplicability of thetrust fund doctrine, under which corporate debtors might look to
the unpaid subscriptions for the satisfaction of unpaid corporate debts, stating
thus:
It is an established doctrine that subscription to the capital stock of a corporation constitute a fund to which creditors have a right to look up to for satisfaction of their claims, and that the assignee in insolvency can maintain an action upon any unpaid stock subscription in order to realize assets for the payment of its debts (PNB vs. Bitulok Sawmill, 23 SCRA 1366).
Premised on the above-doctrine, an inference could be made that the funds, which consists of the payment of subscriptions of the stockholders, is where the creditors can claim monetary considerations for the satisfaction of their claims. If these funds which ought to be fully subscribed by the stockholders were not paid or remain an unpaid subscription of the corporation then the creditors have no other recourse to collect from the corporation of its liability. Such occurrence was evident in the case at bar wherein the appellants as stockholders failed to fully pay their unpaid subscriptions, which left the creditors helpless in collecting their claim due to insufficiency of funds of the corporation. Likewise, the claim of appellants that they already paid the unpaid subscriptions could not be given weight because said payment did not reflect in the Articles of Incorporations of BMPI that the unpaid subscriptions were fully paid by the appellants’ stockholders. For it is a rule that a stockholder may be sued directly by creditors to the extent of their unpaid subscriptions to the corporation (Keller vs. COB Marketing, 141 SCRA 86).
Moreover, a corporation has no power to release a subscription or its capital stock, without valuable consideration for such releases, and as against creditors, a reduction of the capital stock can take place only in the manner and under the conditions prescribed by the statute or the charter or the Articles of Incorporation. (PNB vs. Bitulok Sawmill, 23 SCRA 1366).[18]
The
CAdeclared thatthe inconsistency in the issuance of the ORs rendered the claim
of full payment of the subscriptions to the capital stock unworthy of
consideration; andheld that the veil of corporate fiction could be pierced when
it was used as a shield to perpetrate a fraud or to confuse legitimate issues,
to wit:
Finally, appellants SPS YU, argued that the fact of full payment for the unpaid subscriptions was incontrovertibly established by competent testimonial and documentary evidence, namely – Exhibits “1”, “2”, “3” & “4”, which were never disputed by appellee, clearly shows that they should not be held liable for payment of the said unpaid subscriptions of BMPI.
The reliance is misplaced.
We are hereby reproducing the contents of the above-mentioned exhibits, to wit:
Exh: “1” – YU –
Official Receipt No. 217 dated P45,000.00 allegedly representing the
initial payment of subscriptions of stockholder Albert Yu.
Exh: “2” – YU –
Official Receipt No. 218 dated May 13, 1988 amounting to P135,000.00
allegedly representing full payment of balance of subscriptions of stockholder
Albert Yu. (Record p. 352).
Exh: “3” – YU –
Official Receipt No. 222 dated P5,000.00 allegedly representing the
initial payment of subscriptions of stockholder Zenaida Yu.
Exh: “4” – YU – Official
Receipt No. 223 dated P15,000.00 allegedly representing the
full payment of balance of subscriptions of stockholder Zenaida Yu. (Record p.
353).
Based
on the above exhibits, we are in accord with the lower court’s findings that
the claim of the individual appellants that they fully paid their subscription
to the defendant BMPI is not worthy of consideration, because, in the case of
appellants SPS. YU, there is an inconsistency regarding the issuance of the
official receipt since the alleged payment made on May 13, 1988 amounting to P135,000.00
was covered by Official Receipt No. 218 (Record, p. 352), whereas the alleged
payment made earlier on November 5, 1987 amounting to P5,000.00 is
covered by Official Receipt No. 222 (Record, p. 353). Such issuance is a clear
indication that said receipts were belatedly issued just to suit their claim
that they have fully paid the unpaid subscriptions since in the ordinary course
of business, a receipt is issued earlier must have serial numbers lower than
those issued on a later date. But in the case at bar, the receipt issued on
Spouses
Halley and Viñeza moved for a reconsideration, but the CA denied their motion for reconsideration.
Issues
Only Donnina Halley has come to the
Court to seek a further review, positing the following for our consideration
and resolution, to wit:
I.
THE COURT OF APPEALS ERRED IN AFFIRMING IN
TOTO THE DECISION THAT DID
II.
THE COURT OF APPEALS ERRED IN AFFIRMING THE
DECISION OF THE REGIONAL TRIAL COURT WHICH ESSENTIALLY ALLOWED THE PIERCING OF
THE VEIL OF CORPORATE FICTION
III.
THE HONORABLE COURT OF APPEALS ERRED IN
APPLYING THE TRUST FUND DOCTRINE WHEN THE GROUNDS THEREFOR HAVE NOT BEEN
SATISFIED.
On
the first error, the petitioner contends that the RTC lifted verbatim from the memorandum
of Printwell; and submits that the RTCthereby violatedthe requirement imposed
in Section 14, Article VIII of the Constitution[20] as well as in Section 1,Rule 36 of the
Rules of Court,[21]to the effect that a judgment or
final order of a court should state clearly and distinctly the facts and the
law on which it is based. The petitioner claims that the RTC’s violation
indicated that the RTC did not analyze the case before rendering its decision,
thus denying her the opportunity to analyze the decision; andthat a suspicion
of partiality arose from the fact that the RTC decision was but a replica of Printwell’s
memorandum.She cites Francisco v.
Permskul,[22] in which the Court has stated that
the reason underlying the constitutional requirement, that every decision
should clearly and distinctly state the facts and the law on which it is based,
is to inform the reader of how the court has reached its decision and thereby
give the losing party an opportunity to study and analyze the decision and
enable such party to appropriately assign the errors committed therein on
appeal.
On
the second and third errors, the petitioner maintains that the CA and the RTC
erroneously pierced the veil of corporate fiction despite the absence of cogent
proof showing that she, as stockholder of BMPI, had any hand in transacting
with Printwell; thatthe CA and the RTC failed to appreciate the evidence that she
had fully paid her subscriptions; and the CA and the RTCwrongly relied on the articles of incorporation in determining
the current list of unpaid subscriptions despite the articles of incorporationbeing at best reflectiveonly of the
pre-incorporation status of BMPI.
As
her submissions indicate, the petitioner assails the decisions of the CA on: (a) the propriety of disregarding the
separate personalities of BMPI and its stockholdersby piercing the thin veil
that separated them; and (b) the
application of the trust fund doctrine.
Ruling
The
petition for review fails.
I
The RTC did not violate
the Constitution and the Rules of Court
The contention of the petitioner,
that the RTC merely copied the memorandum of Printwell in writing its decision,
and did not analyze the records on its own, thereby manifesting a bias in favor
of Printwell, is unfounded.
It is noted that the petition for
review merely generally alleges that starting from its page 5, the decision of
the RTC “copied verbatim the allegations of herein Respondents in its
Memorandum before the said court,” as if “the Memorandum was the draft of the
Decision of the Regional Trial Court of Pasig,”[23]but fails to specify either the
portions allegedly lifted verbatim from the memorandum, or why she regards the
decision as copied. The omission renders thepetition for review insufficient to
support her contention, considering that the mere similarityin language or
thought between Printwell’s memorandum and the trial court’s decisiondid not necessarily
justify the conclusion that the RTC simply lifted verbatim or copied from thememorandum.
It is to be observed in this
connection that a trial or appellate judge may occasionally viewa party’s
memorandum or brief as worthy of due consideration either entirely or partly. When
he does so, the judgemay adopt and incorporatein his adjudicationthe memorandum
or the parts of it he deems suitable,and yet not be guilty of the accusation of
lifting or copying from the memorandum.[24] This isbecause ofthe avowed
objective of the memorandum to contribute in the proper illumination and correct
determination of the controversy.Nor is there anything untoward in the congruence
of ideas and views about the legal issues between himself and the party drafting
the memorandum.The frequency of similarities in argumentation, phraseology,
expression, and citation of authorities between the decisions of the courts and
the memoranda of the parties, which may be great or small, can be fairly
attributable tothe adherence by our courts of law and the legal profession to
widely knownor universally accepted precedents set in earlier judicial actions with
identical factual milieus or posing related judicial dilemmas.
We also do not agree with the
petitioner that the RTC’s manner of writing the decisiondeprivedher ofthe opportunity
to analyze its decisionas to be able to assign errors on appeal. The contrary
appears, considering that she was able to impute and assignerrors to the RTCthat
she extensively discussed in her appeal in the CA, indicating her thorough analysis
ofthe decision of the RTC.
Our own readingof the trial court’s
decision persuasively shows that the RTC did comply with the requirements regarding
the content and the manner of writing a decision prescribed in the Constitution
and the Rules of Court. The decision of
the RTC contained clear and distinct findings of facts, and stated the
applicablelaw and jurisprudence, fully explaining why the defendants were being
held liable to the plaintiff. In short, the
reader was at once informed of the factual and legal reasons for the ultimate
result.
II
Corporate personality not to be used to foster
injustice
Printwell
impleaded the petitioner and the other stockholders of BMPI for two reasons,
namely: (a) to reach the unpaid
subscriptions because it appeared that such subscriptions were the remaining
visible assets of BMPI; and (b) to
avoid multiplicity of suits.[25]
The petitionersubmits that she had no participation in the transaction between BMPI and
Printwell;that BMPI acted on its own; and that shehad no hand in persuading
BMPI to renege on its obligation to pay. Hence, she should not be personally
liable.
We rule
against the petitioner’s submission.
Although a
corporation has a personality separate and distinct from those of its stockholders,
directors, or officers,[26]such
separate and distinct personality is merely a fiction created by law for the
sake of convenience and to promote the ends of justice.[27]The
corporate personality may be disregarded, and the individuals composing the
corporation will be treated as individuals, if the corporate entity is being used
as a cloak or cover for fraud or illegality;as a justification for a wrong; as
an alter ego, an adjunct, or a business conduit for the sole benefit of the
stockholders.[28] As a
general rule, a corporation is looked upon as a legal entity, unless and until
sufficient reason to the contrary appears. Thus,the courts always presume good
faith, andfor that reason accord prime importance to the separate personality
of the corporation, disregarding the corporate personality only after the
wrongdoing is first clearly and convincingly established.[29]It thus behooves
the courts to be careful in assessing the milieu where the piercing of the
corporate veil shall be done.[30]
Although nowhere
in Printwell’s amended complaint or in the testimonies Printwell offered can it
be read or inferred from that the petitioner was instrumental in persuading
BMPI to renege onits obligation to pay; or that sheinduced Printwell to extend
the credit accommodation by misrepresenting the solvency of BMPI toPrintwell, her
personal liability, together with that of her co-defendants, remainedbecause the
CA found her and the other defendant stockholders to be in charge of the
operations of BMPI at the time the unpaid obligation was transacted and
incurred, to wit:
In the case at bench, it is undisputed that
BMPI made several orders on credit from appellee PRINTWELL involving the
printing of business magazines, wrappers and subscription cards, in the total
amount of P291,342.76
(Record pp. 3-5, Annex “A”) which facts were never denied by appellants’
stockholders that they owe(d) appellee the amount of P291,342.76. The said goods were delivered to
and received by BMPI but it failed to pay its overdue account to appellee as
well as the interest thereon, at the rate of 20% per annum until fully paid. It
was also during this time that appellants stockholders were in charge of the
operation of BMPI despite the fact that they were not able to pay their unpaid
subscriptions to BMPI yet greatly benefited from said transactions. In view of
the unpaid subscriptions, BMPI failed to pay appellee of its liability, hence
appellee in order to protect its right can collect from the appellants
stockholders regarding their unpaid subscriptions. To deny appellee from
recovering from appellants would place appellee in a limbo on where to assert
their right to collect from BMPI since the stockholders who are appellants
herein are availing the defense of corporate fiction to evade payment of its
obligations.[31]
It follows,
therefore, that whether or not the petitioner persuaded BMPI to renege on its
obligations to pay, and whether or not she induced Printwell to transact with
BMPI were not gooddefensesin the suit.
III
Unpaid creditor may satisfy its claim from
unpaid subscriptions;stockholders must
prove full payment oftheir subscriptions
Both the
RTC and the CA applied the trust fund
doctrineagainst the defendant stockholders, including the petitioner.
The
petitionerargues, however,that the trust
fund doctrinewas inapplicablebecause she had already fully paid her
subscriptions to the capital stock of BMPI. She thus insiststhat both lower
courts erred in disregarding the evidence on the complete payment of the
subscription, like receipts, income tax returns, and relevant financial
statements.
The
petitioner’s argumentis devoid of substance.
The trust fund doctrineenunciates a –
xxx rule that the property of a corporation is a trust
fund for the payment of creditors, but such property can be called a trust fund
‘only by way of analogy or metaphor.’ As between the corporation itself and its
creditors it is a simple debtor, and as between its creditors and stockholders
its assets are in equity a fund for the payment of its debts.[32]
The trust fund doctrine, first enunciated in
the American case of Wood v. Dummer,[33]was adopted
in our jurisdiction in Philippine Trust
Co. v. Rivera,[34]where thisCourt
declared that:
It is established
doctrine that subscriptions to the capital of a corporation constitute a fund
to which creditors have a right to look for satisfaction of their claims and
that the assignee in insolvency can maintain an action upon any unpaid stock
subscription in order to realize assets for the payment of its debts. (Velasco
vs. Poizat, 37 Phil., 802) xxx[35]
We clarify
that the trust fund doctrineis not
limited to reaching the stockholder’s unpaid subscriptions. The scope of the
doctrine when the corporation is insolvent encompasses not only the capital
stock, but also other property and assets generally regarded in equity as a
trust fund for the payment of corporate debts.[36]All assets
and property belonging to the corporation held in trust for the benefit of
creditors thatwere distributed or in the possession of the stockholders,
regardless of full paymentof their subscriptions, may be reached by the
creditor in satisfaction of its claim.
Also, under
the trust fund doctrine,a corporation
has no legal capacity to release an original subscriber to its capital stock
from the obligation of paying for his shares, in whole or in part,[37] without a
valuable consideration,[38] or
fraudulently, to the prejudice of creditors.[39]The
creditor is allowed to maintain an action upon any unpaid subscriptions and
thereby steps into the shoes of the corporation for the satisfaction of its
debt.[40]To make out
a prima facie case in a suit against
stockholders of an insolvent corporation to compel them to contribute to the
payment of its debts by making good unpaid balances upon their subscriptions,
it is only necessary to establish that thestockholders have not in good faith
paid the par value of the stocks of the corporation.[41]
The
petitionerposits that the finding of irregularity attending the issuance of the
receipts (ORs) issued to the other stockholders/subscribers should not affect
her becauseher receipt did not suffer similar irregularity.
Notwithstanding
that the RTC and the CA did not find any irregularity in the OR issued in her favor,we
still cannot sustain the petitioner’s defense of full payment of her
subscription.
In civil
cases, theparty who pleads payment has the burden of proving it, that even
where the plaintiff must allege nonpayment, the general rule is that the burden
rests on the defendant to prove payment, rather than on the plaintiff to prove
nonpayment. In other words, the debtor bears the burden of showing with
legal certainty that the obligation has been discharged by payment.[42]
Apparently,
the petitioner failed to discharge her burden.
A receipt
is the written acknowledgment of the fact of payment in money or other
settlement between the seller and the buyer of goods, thedebtor or thecreditor,
or theperson rendering services, and theclient or thecustomer.[43]Althougha
receipt is the best evidence of the fact of payment, it isnot conclusive, but
merely presumptive;nor is it exclusive evidence,considering thatparole evidence
may also establishthe fact of payment.[44]
The
petitioner’s ORNo. 227,presentedto prove the payment of the balance of her
subscription, indicated that her supposed payment had beenmade by means of a
check. Thus, to discharge theburden to prove payment of her subscription, she
had to adduce evidence satisfactorily proving that her payment by check wasregardedas
payment under the law.
Paymentis
defined as the delivery of money.[45]Yet, because
a check is not money and only substitutes for money, the delivery of a check
does not operate as payment and does not discharge the obligation under a
judgment.[46] The delivery
of a bill of exchange only produces the fact of payment when the bill has been
encashed.[47]The
following passage fromBank of Philippine
Islands v. Royeca[48]is
enlightening:
Settled
is the rule that payment must be made in legal tender. A check is not legal tender and, therefore, cannot constitute a valid
tender of payment. Since a negotiable instrument is only a substitute for money
and not money, the delivery of such an instrument does not, by itself, operate
as payment. Mere delivery of checks does not discharge the obligation under a
judgment. The obligation is not extinguished and remains suspended until the
payment by commercial document is actually realized.
To establish their defense, the respondents
therefore had to present proof, not only that they delivered the checks to the
petitioner, but also that the checks were encashed. The respondents failed
to do so. Had the checks been actually
encashed, the respondents could have easily produced the cancelled checks as
evidence to prove the same. Instead, they merely averred that they believed in
good faith that the checks were encashed because they were not notified of the
dishonor of the checks and three years had already lapsed since they issued the
checks.
Because
of this failure of the respondents to present sufficient proof of payment, it
was no longer necessary for the petitioner to prove non-payment, particularly
proof that the checks were dishonored. The burden of evidence is shifted only
if the party upon whom it is lodged was able to adduce preponderant evidence to
prove its claim.
Ostensibly,
therefore, the petitioner’s mere submission of the receipt issued in exchange
of the check did not satisfactorily establish her allegation of full payment of
her subscription. Indeed, she could not even inform the trial court about the
identity of her drawee bank,[49]and about
whether the check was cleared and its amount paid to BMPI.[50]In fact, she
did not present the check itself.
Theincome
tax return (ITR) and statement of assets and liabilities of BMPI, albeit
presented, had no bearing on the issue of payment of the subscription because
they did not by themselves prove payment. ITRsestablish ataxpayer’s liability
for taxes or a taxpayer’s claim for refund. In the same manner, the deposit
slips and entries in the passbook issued in the name of BMPI were hardly
relevant due to their not reflecting the
alleged payments.
It is
notable, too, that the petitioner and her co-stockholders did not support their
allegation of complete payment of their respective subscriptions with the stock
and transfer book of BMPI. Indeed, books and records of a corporation (including
the stock and transfer book) are admissible in evidence in favor of or against
the corporation and its members to prove the corporate acts, its financial
status and other matters (like the status of the stockholders), and are
ordinarily the best evidence of corporate acts and proceedings.[51]Specifically,
a stock and transfer book is necessary as a measure of precaution, expediency,
and convenience because it provides the only certain and accurate method of
establishing the various corporate acts and transactions and of showing the
ownership of stock and like matters.[52]That she
tendered no explanation why the stock and transfer book was not presented
warrants the inference that the book did not reflect the actual payment of her
subscription.
Nor did the
petitioner present any certificate of stock issued by BMPI to her. Such a
certificate covering her subscription might have been a reliable evidence of
full payment of the subscriptions, considering that under Section 65 of the Corporation Code a certificate of stock
issues only to a subscriber who has fully paid his subscription. The lack of
any explanation for the absence of a stock certificate in her favor likewise
warrants an unfavorable inference on the issue of payment.
Lastly, the
petitioner maintains that both lower courts erred in relying on the articles of incorporationas proof of the
liabilities of the stockholders subscribing to BMPI’s stocks, averring that the
articles of incorporationdid not reflect
the latest subscription status of BMPI.
Although
the articles of incorporation may
possibly reflect only the pre-incorporation status of a corporation, the lower
courts’ reliance on that document to determine whether the original subscribersalready
fully paid their subscriptions or not was neither unwarranted nor erroneous. As
earlier explained, the burden of establishing the fact of full payment belonged
not to Printwell even if it was the plaintiff, but to the stockholders like the
petitioner who, as the defendants, averredfull payment of their subscriptions as
a defense. Their failure to substantiate their averment of full payment, as
well as their failure to counter the reliance on the recitals found in the articles of incorporation simply meant
their failure or inability to satisfactorily prove their defense of full
payment of the subscriptions.
To
reiterate, the petitionerwas liablepursuant to the trust fund doctrine for the corporate obligation of BMPI by virtue
of her subscription being still unpaid. Printwell, as BMPI’s creditor,had a
right to reachher unpaid subscription in satisfaction of its claim.
IV
Liability of stockholders for corporate debts isup
to the extentof their unpaid subscription
The RTC declared
the stockholders pro rata liable for
the debt(based on the proportion to their shares in the capital stock of BMPI);
and held the petitionerpersonally liable onlyin the amount of P149,955.65.
We do not
agree. The RTC lacked the legal and factual support for its prorating the
liability. Hence, we need to modify the extent of the petitioner’s personal
liability to Printwell. The prevailing rule is that a stockholder is personally
liable for the financial obligations of the corporation to the extent of his unpaid subscription.[53]In view ofthe
petitioner’s unpaid subscription being worth P262,500.00, shewas liable
up to that amount.
Interest is
also imposable on the unpaid obligation. Absent any stipulation, interest is
fixed at 12% per annum from the date
the amended complaint was filed on February 8, 1990 until the obligation (i.e., to the extent of the petitioner’s
personal liability of P262,500.00) is fully paid.[54]
Lastly, we
find no basis togrant attorney’s fees, the award for which must be supported by
findings of fact and of law as provided under Article 2208 of the Civil Code[55]incorporated
in the body of decision of the trial court. The absence of the requisite
findings from the RTC decision warrants the deletion of the attorney’s fees.
ACCORDINGLY, we deny the petition for review on certiorari;and affirm with modification the decision promulgated on
August 14, 2002by ordering the petitionerto pay to Printwell, Inc. the sum of P262,500.00,
plus interest of 12% per annum to be
computed from February 8, 1990 until full payment.
The petitioner shall paycost of suit
in this appeal.
SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice
WE CONCUR:
CONCHITA CARPIOMORALES
Associate Justice
Chairperson
ARTURO
D. BRION
MARTIN
Associate Justice
Associate Justice
MARIA
Associate Justice
A T T E S T A T I O N
I attest
that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court’s
Division.
CONCHITA
CARPIO MORALES
Associate Justice
Chairperson
C E R T I F I C A T I O N
Pursuant
to Section 13, Article VIII of the Constitution, and the Division Chairperson’s
Attestation, I certify that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
RENATO
C. CORONA
Chief Justice
[1] Penned by Associate Justice Mercedes Gozo-Dadole, with Associate Justices
Salvador J. Valdez, Jr. and Amelita G. Tolentino concurring, rollo, pp. 36-49.
[2] Entitled Printwell, Inc. v. Business Media Phils., Inc., Donnina C. Halley and Simon Halley, Roberto V. Cabrera, Jr., Albert T. Yu, Zenaida V. Yu, and Rizalino C. Vineza, rollo, pp. 222-230.
[3]
[4] Records, pp. 6-7.
[5]
[6]
[7]
[8]
[9]
[10]
[11]
[12]
[13]
[14]
[15]
[16] Records, p. 371.
[17] Rollo,
p. 45.
[18]
[19]Rollo, pp. 47-49.
[20] Section 14. No decision shall be rendered by any court without
expressing therein clearly and distinctly the facts and the law on which it is based.
xxx
[21] Section 1. Rendition of judgments
and final orders.—A judgment or final order determining the merits of the
case shall be in writing personally and directly prepared by the judge, stating clearly and distinctly the facts
and the law on which it is based, signed by him, and filed with the clerk
of the court.
[22] G.R. No. 81006,
[23] Rollo, p. 23.
[24] See, for instance, Bank of the Philippine Islands v. Leobrera, G.R. No. 137147, January 29, 2002, 375 SCRA 81,
86 (where the Court declared that although it was not good practice, there was
nothing illegal in the act of the trial court completely copying the memorandum
submitted by a party provided that the decision clearly and distinctly stated
sufficient findings of fact and the law on which it was based).
[25] Rollo, p. 55.
[26] Section 2, Corporation Code; Article 44 (3), Civil Code; Francisco Motors
Corporation v. Court of Appeals, G.R. No. 100812, June 25, 1999, 309 SCRA
72, 82.
[27] Prudential
Bank v. Alviar, G.R. No. 150197, July 28, 2005, 464 SCRA 353, 362; Martinez v. Court of Appeals, G.R. No.
131673, September 10, 2004, 438 SCRA 130, 149-150.
[28] Light Rail Transit Authority v. Venus, Jr., G.R. No. 163782, March 24, 2006, 485 SCRA 361, 372;R&E Transport, Inc. v. Latag, G.R. No. 155214, February 13, 2004, 422 SCRA 698; Secosa v. Heirs of Erwin Suarez Francisco, G.R. No. 160039, June 29, 2004, 433 SCRA 273;Gochan v. Young, G.R. No. 131889, March 12, 2001, 354 SCRA 207, 222; Development Bank of the Philippines v. Court of Appeals, G.R. No. 110203, May 9, 2001, 357 SCRA 626; Del Rosario v. National Labor Relations Commission, G.R. No. 85416, July 24, 1990, 187 SCRA 777, 780.
[29] Solidbank Corporation v. Mindanao
Ferroalloy Corporation, G.R. No. 153535, July 28, 2005, 464 SCRA 409, 424-425; Construction & Development Corporation
of the Philippines v. Cuenca, G.R. No. 163981, August 12, 2005, 466 SCRA
714, 727; Matuguina Integrated Wood
Products, Inc. v. Court of Appeals, G.R. No. 98310, October 24, 1996, 263
SCRA 490, 509.
[30] Francisco Motors Corporation v.
Court of Appeals, supra, note 26.
[31] Rollo, p. 45.
[32] 42A, Words and Phrases, Trust Fund Doctrine, p. 445, citing McIver v. Young Hardware Co., 57 S.E. 169, 171, 144 N.C. 478, 119 Am. St. Rep. 970; Gallagher v. Asphalt Co. of America, 55 A. 259, 262, 65 N.J. Eq. 258.
[33] 3 Mason 308, Fed Cas. No. 17, 944.
[34] 44 Phil 469 (1923).
[35]
[36] Villanueva, Philippine Corporate
Law (2001), pp. 558, citing Chicago
Rock Island & Pac. R.R. Co. v. Howard, 7 Wall., 392, 19 L. Ed. 117; Sawyer v. Hoag, 17 Wall 610, 21 L. Ed.
731; and Pullman v. Upton, 96 U.S.
328, 24 L. Ed. 818.
[37] Velasco
v. Poizat, 37 Phil 802,
808 (1918).
[38] Philippine Trust v. Rivera, supra, note 34, pp. 470-471.
[39] Fogg v. Blair, 139 US 118 (1891).
[40] See Velasco v. Poizat, 37 Phil
802, 806 (1918).
[41] Tierney v. Ledden, 121 NW 1050.
[42] Alonzo v. San Juan, G.R. No. 137549, February 11,
2005, 451 SCRA 45, 55-56; Union Refinery
Corporation v. Tolentino, Sr., G.R. No. 155653, September 30, 2005, 471
SCRA 613, 621.
[43] Commissioner
of Internal Revenue v. Manila Mining Corporation, G.R. No. 153204, August 31, 2005, 468 SCRA 571,
590.
[44] Philippine
National Bank v. Court of Appeals, G.R. No. 116181, April 17, 1996, 256
SCRA 491, 335-336; Towne & City Development Corporation v.
Court of Appeals,
G.R. No. 135043, July 14, 2004, 434 SCRA 356, 361-362.
[45] Art. 1232, Civil Code.
[46] Philippine
Airlines, Inc. v. Court of Appeals, G.R. No. 49188, January 30, 1990, 181 SCRA 557, 568.
[47] Art. 1249, Civil Code.
[48] G.R. No. 176664, July 21, 2008, 559 SCRA 207, 217-219 (underscoring
supplied for emphasis).
[49] See TSN dated November 6, 1991, p. 4.
[50] TSN dated
[51] Bitong v. Court of Appeals (Fifth
Division), G.R. No.
123553,
[52] Lanuza v. Court of Appeals, G.R. No. 131394, March 28, 2005,
454 SCRA 54, 67.
[53] Edward
A. Keller & Co., Ltd., v. COB Group Marketing, Inc., G.R. No. L-68907,
[54] See Eastern
Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412,
[55] Bunyi v. Factor, G.R. No. 172547, June 30, 2009, 591 SCRA 350, 363; Lapanday Agricultural and Development Corporation (LADECO) v. Angala, G.R. No. 153076, June 21, 2007, 525 SCRA 229; Pajuyo v. Court of Appeals, G.R. No. 146364, June 3, 2004, 430 SCRA 492, 524.