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San Juan Structural v. CA - G.R. No. 129459 (Case DIGEST)

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Jezen Esther Pati

The Court ruled against piercing the corporate veil of Motorich Sales Corporation. San Juan Structural and Steel Fabricators failed to prove that Motorich was formed or operated for fraudulent purposes or to shield illegal activities at the expense of third parties like San Juan. Additionally, Motorich did not meet the definition of a close corporation under the Corporation Code simply because the Gruenbergs owned nearly all of its stock, as its articles of incorporation did not restrict the number of shareholders or prohibit public stock offerings.

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San Juan Structural v. CA - G.R. No. 129459 (Case DIGEST)

Uploaded by

Jezen Esther Pati
4K views2 pages
The Court ruled against piercing the corporate veil of Motorich Sales Corporation. San Juan Structural and Steel Fabricators failed to prove that Motorich was formed or operated for fraudulent purposes or to shield illegal activities at the expense of third parties like San Juan. Additionally, Motorich did not meet the definition of a close corporation under the Corporation Code simply because the Gruenbergs owned nearly all of its stock, as its articles of incorporation did not restrict the number of shareholders or prohibit public stock offerings.

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San Juan Structural v. CA - G.R. No. 129459 [Case DIGEST]

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The Court ruled against piercing the corporate veil of Motorich Sales Corporation. San Juan Structural and Steel Fabricators failed to prove that Motorich was formed or operated for fraudulent purposes or to shield illegal activities at the expense of third parties like San Juan. Additionally, Motorich did not meet the definition of a close corporation under the Corporation Code simply because the Gruenbergs owned nearly all of its stock, as its articles of incorporation did not restrict the number of shareholders or prohibit public stock offerings.

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© All Rights Reserved
Download as DOCX, PDF, TXT or read online from Scribd
Download as docx, pdf, or txt
4K views2 pages

San Juan Structural v. CA - G.R. No. 129459 (Case DIGEST)

Uploaded by

Jezen Esther Pati
The Court ruled against piercing the corporate veil of Motorich Sales Corporation. San Juan Structural and Steel Fabricators failed to prove that Motorich was formed or operated for fraudulent purposes or to shield illegal activities at the expense of third parties like San Juan. Additionally, Motorich did not meet the definition of a close corporation under the Corporation Code simply because the Gruenbergs owned nearly all of its stock, as its articles of incorporation did not restrict the number of shareholders or prohibit public stock offerings.

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[ G.R. No.

129459, September 29, 1998 ]


SAN JUAN STRUCTURAL AND STEEL FABRICATORS, INC., Petitioner,
VS.
COURT OF APPEALS, MOTORICH SALES CORPORATION, NENITA LEE
GRUENBERG, ACL DEVELOPMENT CORP. AND JNM REALTY AND DEVELOPMENT
CORP., Respondents.

FACTS:

San Juan Structural and Steel Fabricators entered into an agreement with Motorich Sales
Corporation through Nenita Gruenberg, corporate treasurer of Motorich, for the transfer to the
former a parcel of land upon a P100,000 earnest money, balance to be payable within March 2,
1989. Upon payment of the earnest money, and on March 1, 1989, San Juan allegedly asked to
be submitted a computation of the balance due to Motorich. The latter, despite repeated
demands, refused to execute the Deed of Assignment of the land. San Juan discovered that
Motorich entered into a Deed of Absolute Sale of the land to ACL Development
Corporation. Hence, San Juan filed a complaint with the RTC.

On the other hand, Motorich contends that since Nenita Gruenberg was only the treasurer of said
corporation, and that its president, Reynaldo Gruenberg, did not sign the agreement entered into
by San Juan and Motorich, the treasurer’s signature was inadequate to bind Motorich to the
agreement. Furthermore, Nenita contended that since San Juan was not able to pay within the
stipulated period, no deed of assignment could be made. The deed was agreed to be executed
only after receipt of the cash payment, and since according to Nenita, no cash payment was made
on the due date, no deed could have been executed.

RTC dismissed the case holding that Nenita Gruenberg was not authorized by Motorich to enter
into said contract with San Juan, and that a majority vote of the BoD was necessary to sell assets
of the corporation in accordance with Sec. 40 of the Corporation Code. CA affirmed this
decision. Hence, this petition with SC.

ISSUE (on Close Corporation):

Whether or not the veil of corporate fiction could be pierced.

RULING:

No.

COMMERCIAL LAW; CORPORATION CODE; PIERCING THE CORPORATE VEIL IS


NOT JUSTIFIED IN CASE AT BAR. —
We stress that the corporate fiction should be set aside when it becomes a shield against liability
for fraud, illegality or inequity committed on third persons. The question of piercing the veil of
corporate fiction is essentially, then, matter of proof.
In the present case, however, the Courts finds no reason to pierce the corporate veil of
Respondent Motorich. Petitioner utterly failed to establish that said corporation was formed, or
that it is operated, for the purpose of shielding any alleged fraudulent or illegal activities of its
officers or stockholders; or that the said veil was used to conceal fraud, illegality or inequity at
the expense of third persons like petitioner.

COMMERCIAL LAW; CORPORATION CODE; PRIVATE RESPONDENT CORPORATION


IS NOT A CLOSE CORPORATION AS DEFINED UNDER SECTION 96 OF THE
CORPORATION CODE. —
The articles of incorporation of Motorich Sales Corporation does not contain any provision
stating that (1) the number of stockholders shall not exceed 20, or (2) a preemption of shares is
restricted in favor of any stockholder or of the corporation, or (3) listing its stocks in any stock
exchange or making a public offering of such stocks is prohibited.

From its articles, it is clear that Respondent Motorich is not a close corporation. Motorich does
not become one either, just because Spouses Reynaldo and Nenita Gruenberg owned 99.866% of
its subscribed capital stock. The "[m]ere ownership by a single stockholder or by another
corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient
ground for disregarding the separate corporate personalities." So, too, a narrow distribution of
ownership does not, by itself, make a close corporation.

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