NAMARCO VS ASSOCIATED FINANCE CO. INC. CASE DIGEST

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.

CORPORATION LAW; DUE PROCESS; FRAUD CASE

FACTS:

  • ASSOCIATED, a domestic corporation, through its President, appellee Sycip, entered into an agreement to exchange sugar with NAMARCO, represented by its then General Manager, Estrella, whereby the former would deliver to the latter refined sugar in exchange bags of "Busilak" and  piculs of "Pasumil" raw sugar, both agreeing to pay liquidated damages should either party fail to comply with the terms and conditions.
  • NAMARCO delivered to ASSOCIATED bars of "Busilak" and piculs of "Pasumil" domestic raw sugar. 
  • ASSOCIATED failed to deliver to NAMARCO bags of refined sugar agreed upon
  • NAMARCO demanded in writing from the ASSOCIATED either immediate delivery thereof or payment of its equivalent cash value
  • ASSOCIATED, through Sycip, offered to pay NAMARCO the value of bags of refined sugar at the rate of P15.30 per bag, but the latter rejected the offer, instead, of the same year it demanded payment of the bags of "Busilak" raw sugar at P15.30 per bag and of the piculs of "Pasumil" raw sugar at P16.50 per picul, amounting a total price of P403,514.28 based on the sugar quotations from the date when the exchange agreement was entered into.
  • ASSOCIATED refused to deliver the raw sugar or pay for the refined sugar delivered to it, inspite of repeated demands therefore, NAMARCO instituted the present action in the lower court to recover the sum in payment of the raw sugar as well as damages.
  • By way of affirmative defenses, Defendants alleged that the correct value of the sugar delivered by NAMARCO to them was P259,451.09 (quedan basis) and not P403,514.38. 

ISSUE:

Whether or not Sycip may be held liable, jointly and severally with his co-defendant, for the sums of money adjudged in favor of NAMARCO

HELD:

  • YES. Where corporate liability was sought to be enforced against the President who fraudulently entered into a contract in the name of the corporation, the piercing of the veil of corporate fiction was sought with the President being already made a defendant at the onset together with the corporation. 
  • The evidence of record shows that:
    • Of the capital stock of ASSOCIATED, Sycip owned P60,000.00 worth of shares, while his wife, the second biggest stockholder owned P20,000.00 worth of shares; that the par value of the subscribed capital stock of ASSOCIATED was only P105,000.00;
    • Negotiations that lead to the execution of the exchange agreement in question were conducted exclusively by Sycip on behalf of ASSOCIATED; Referred to himself as the one who contracted or transacted the business in his personal capacity, and asserted that the exchange agreement was his personal contract; 
    • It was Sycip who made personal representations and gave assurances that ASSOCIATED was in actual possession of the refined sugar and that the same was ready for delivery; 
    • that, as a matter of fact, ASSOCIATED was at that time already insolvent; 
  • The foregoing facts lead to no other conclusion than that Sycip was guilty of fraud because through false representations he succeeded in inducing NAMARCO to enter into the aforesaid exchange agreement, with full knowledge, on his part, on the fact that ASSOCIATED whom he represented and over whose business and affairs he had absolute control, was in no position to comply with the obligation it had assumed. 
  • We feel perfectly justified in "piercing the veil of corporate fiction" and in holding Sycip personally liable, jointly and severally with his co-defendant, for the sums of money adjudged in favor of appellant. It is settled law in this and other jurisdictions that when the corporation is the mere alter ego of a person, the corporate fiction may be disregarded; the same being true when the corporation is controlled, and its affairs are so conducted as to make it merely an instrumentality, agency or conduit of another.

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