05 Violago v BA Finance

8/3/15 5:21 PMSUPREME COURT REPORTS ANNOTATED VOLUME 559

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SO ORDERED.

Quisumbing (Chairperson), Ynares-Santiago, Carpio-Morales and Velasco, Jr., JJ., concur.

Petition denied.

Notes.In contract to sell, the payment of the purchaseprice, is a positive suspensive condition, the failure of whichis not a breach, casual or serious but a situation thatprevents the obligation of the vendor to convey title fromacquiring an obligatory force. (Zamora Realty andDevelopment Corporation vs. Office of the President of thePhilippines, 506 SCRA 591 [2006])

The execution of a deed of sale is merely a prima faciepresumption of delivery of possession of a piece of realproperty, which is destroyed when the delivery is noteffected because of legal impediments. (Capuyoc vs. De Sola,504 SCRA 176 [2006])

o0o

G.R. No. 158262.July 21, 2008.*

SPS. PEDRO AND FLORENCIA VIOLAGO, petitioners, vs.BA FINANCE CORPORATION and AVELINO VIOLAGO,respondents.

Negotiable Instruments Law; Promissory Notes; The promissorynote is clearly negotiable.The promissory note is clearlynegotiable. The appellate court was correct in finding all therequisites of a negotiable instrument present. The NIL provides:Section 1. Form of Negotiable Instruments.An instrument to benegotiable must conform to the following requirements: (a) It mustbe in writing and

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* SECOND DIVISION.

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70 SUPREME COURT REPORTS ANNOTATED

Violago vs. BA Finance Corporation

signed by the maker or drawer; (b) Must contain an unconditionalpromise or order to pay a sum certain in money; (c) Must be payableon demand, or at a fixed or determinable future time; (d) Must bepayable to order or to bearer; and (e) Where the instrument isaddressed to a drawee, he must be named or otherwise indicatedtherein with reasonable certainty.

Same; Same; The law presumes that a holder of a negotiableinstrument is a holder thereof in due course.The law presumesthat a holder of a negotiable instrument is a holder thereof in duecourse. In this case, the CA is correct in finding that BA Financemeets all the foregoing requisites: In the present recourse, on itsface, (a) the Promissory Note, Exhibit A, is complete andregular; (b) the Promissory Note was endorsed by the VMSC infavor of the Appellee; (c) the Appellee, when it accepted the Note,acted in good faith and for value; (d) the Appellee was neverinformed, before and at the time the Promissory Note wasendorsed to the Appellee, that the vehicle sold to the Defendants-Appellants was not delivered to the latter and that VMSC hadalready previously sold the vehicle to Esmeraldo Violago. AlthoughJose Olvido mortgaged the vehicle to Generoso Lopez, who assignedhis rights to the BA Finance Corporation (Cebu Branch), the sameoccurred only on May 8, 1987, much later than August 4, 1983,when VMSC assigned its rights over the Chattel Mortgage bythe Defendants-Appellants to the Appellee. Hence, Appellee was aholder in due course.

Same; Same; The Negotiable Instruments Law considers everynegotiable instrument prima facie to have been issued for a valuableconsideration.In the hands of one other than a holder in duecourse, a negotiable instrument is subject to the same defenses as ifit were non-negotiable. A holder in due course, however, holds theinstrument free from any defect of title of prior parties and fromdefenses available to prior parties among themselves, and mayenforce payment of the instrument for the full amount thereof.Since BA Finance is a holder in due course, petitioners cannot raisethe defense of non-delivery of the object and nullity of the sale



against the corporation. The NIL considers every negotiableinstrument prima facie to have been issued for a valuableconsideration. In Salas, 181 SCRA 296 (1990), we held that a partyholding an instrument may enforce payment of the instrument forthe full amount thereof. As such, the maker cannot set up thedefense of nullity of

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the contract of sale. Thus, petitioners are liable to respondentcorporation for the payment of the amount stated in the instrument.

Corporation Law; Piercing-of-the-Corporate-Veil; We suggestedas much in Arcilla v. Court of Appeals (215 SCRA 120 [1992]), anappellate proceeding involving petitioner Arcillas bid to avoid theadverse CA decision on argument that he is not personally liable forthe amount adjudged since the same constitutes a corporate liabilitywhich nevertheless cannot be enforced against the corporationwhich has not been impleaded as a party below.The fact thatVMSC was not included as defendant in petitioners third partycomplaint does not preclude recovery by petitioners from Avelino;neither would such non-inclusion constitute a bar to the applicationof the piercing-of-the-corporate-veil doctrine. We suggested as muchin Arcilla v. Court of Appeals, 215 SCRA 120 (1992), an appellateproceeding involving petitioner Arcillas bid to avoid the adverse CAdecision on the argument that he is not personally liable for theamount adjudged since the same constitutes a corporate liabilitywhich nevertheless cannot even be enforced against the corporationwhich has not been impleaded as a party below. In that case, theCourt found as well-taken the CAs act of disregarding the separatejuridical personality of the corporation and holding its president,Arcilla, liable for the obligations incurred in the name of thecorporation although it was not a party to the collection suit beforethe trial court.

PETITION for review on certiorari of the decision andresolution of the Court of Appeals.The facts are stated in the opinion of the Court. Cabrera, Makalintal & Baliad Law Offices for

petitioners. Reyes, Cruz & Associates for respondent Avelino

Violago.



Brillantes, Navarro, Jumamil, Arcilla, Escolin, Martinez& Vivero Law Offices for respondent BA FinanceCorporation.

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VELASCO, JR.,J.:

This is a Petition for Review on Certiorari of the August20, 2002 Decision1 and May 15, 2003 Resolution2 of theCourt of Appeals (CA) in CA-G.R. CV No. 48489 entitled BAFinance Corporation, Plaintiff-Appellee v. Sps. Pedro andFlorencia Violago, Defendants and Third Party Plaintiffs-Appellants v. Avelino Violago, Third Party Defendant-Appellant. Petitioners-spouses Pedro and Florencia Violagopray for the reversal of the appellate courts ruling whichheld them liable to respondent BA Finance Corporation (BAFinance) under a promissory note and a chattel mortgage.Petitioners likewise pray that respondent Avelino Violagobe adjudged directly liable to BA Finance.

The FactsSometime in 1983, Avelino Violago, President of Violago

Motor Sales Corporation (VMSC), offered to sell a car to hiscousin, Pedro F. Violago, and the latters wife, Florencia.Avelino explained that he needed to sell a vehicle toincrease the sales quota of VMSC, and that the spouseswould just have to pay a down payment of PhP 60,500 whilethe balance would be financed by respondent BA Finance.The spouses would pay the monthly installments to BAFinance while Avelino would take care of thedocumentation and approval of financing of the car. Underthese terms, the spouses then agreed to purchase a ToyotaCressida Model 1983 from VMSC.3

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1 Rollo, pp. 14-28. Penned by Associate Justice Romeo J. Callejo, Sr.

(former member of this Court) and concurred in by Associate Justices

Remedios Salazar-Fernando and Danilo B. Pine (now retired).

2 Id., at pp. 30-31.

3 Id., at p. 15.



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On August 4, 1983, the spouses and Avelino signed apromissory note under which they bound themselves to payjointly and severally to the order of VMSC the amount ofPhP 209,601 in 36 monthly installments of PhP 5,822.25 amonth, the first installment to be due and payable onSeptember 16, 1983. Avelino prepared a DisclosureStatement of Loan/Credit Transportation which showed thenet purchase price of the vehicle, down payment, balance,and finance charges. VMSC then issued a sales invoice infavor of the spouses with a detailed description of the ToyotaCressida car. In turn, the spouses executed a chattelmortgage over the car in favor of VMSC as security for theamount of PhP 209,601. VMSC, through Avelino, endorsedthe promissory note to BA Finance without recourse.After receiving the amount of PhP 209,601, VMSC executeda Deed of Assignment of its rights and interests under thepromissory note and chattel mortgage in favor of BAFinance. Meanwhile, the spouses remitted the amount ofPhP 60,500 to VMSC through Avelino.4

The sales invoice was filed with the Land TransportationOffice (LTO)-Baliwag Branch, which issued Certificate ofRegistration No. 0137032 in the name of Pedro on August 8,1983. The spouses were unaware that the same car hadalready been sold in 1982 to Esmeraldo Violago, anothercousin of Avelino, and registered in Esmeraldos name bythe LTO-San Rafael Branch. Despite the spouses demandfor the car and Avelinos repeated assurances, there was nodelivery of the vehicle. Since VMSC failed to deliver the car,Pedro did not pay any monthly amortization to BA Finance.5

On March 1, 1984, BA Finance filed with the RegionalTrial Court (RTC), Branch 116 in Pasay City a complaintfor Replevin with Damages against the spouses. Thecomplaint, docketed as Civil Case No. 1628-P, prayed for thedelivery of the vehicle in favor of BA Finance or, if deliverycannot be

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4 Id., at pp. 15-16.



5 Id.

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effected, for the payment of PhP 199,049.41 plus penalty atthe rate of 3% per month from February 15, 1984 until fullypaid. BA Finance also asked for the payment of attorneysfees, liquidated damages, replevin bond premium, expensesin the seizure of the vehicle, and costs of suit. The RTCissued an Order of Replevin on March 28, 1984. The Violagospouses, as defendants a quo, were declared in default forfailing to file an answer. Eventually, the RTC rendered onDecember 3, 1984 a decision in favor of BA Finance. A writof execution was thereafter issued on January 11, 1985,followed by an alias writ of execution.6

In the meantime, Esmeraldo conveyed the vehicle to JoseV. Olvido who was then issued Certificate of RegistrationNo. 0014830-4 by the LTO-Cebu City Branch on April 29,1985. On May 8, 1987, Jose executed a Chattel Mortgageover the vehicle in favor of Generoso Lopez as security for aloan covered by a promissory note in the amount of PhP260,664. This promissory note was later endorsed to BAFinance, Cebu City branch.7

On August 21, 1989, the spouses Violago filed a Motionfor Reconsideration and Motion to Quash Writ of Executionon the basis of lack of a valid service of summons on them,among other reasons. The RTC denied the motions; hence,the spouses filed a petition for certiorari under Rule 65before the CA, docketed as CA G.R. No. 2002-SP. On May31, 1991, the CA nullified the RTCs order. This CA decisionbecame final and executory.

On January 28, 1992, the spouses filed their Answerbefore the RTC, alleging the following: they never receivedthe vehicle from VMSC; the vehicle was previously sold toEsmeraldo; BA Finance was not a holder in due courseunder Section 59 of the Negotiable Instruments Law (NIL);and the recourse of BA Finance should be against VMSC.On February 25, 1995,

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6 Id., at pp. 16-17.



7 Id., at p. 18.

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the Violago spouses, with prior leave of court, filed a ThirdParty Complaint against Avelino praying that he be heldliable to them in the event that they be held liable to BAFinance, as well as for damages. VMSC was not impleadedas third party defendant. In his Motion to Dismiss andAnswer, Avelino contended that he was not a party to thetransaction personally, but VMSC. Avelinos motion wasdenied and the third party complaint against him wasentertained by the trial court. Subsequently, the spousesbelabored to prove that they affixed their signatures on thepromissory note and chattel mortgage in favor of VMSC inblank.8

The RTC rendered a Decision on March 5, 1994, findingfor BA Finance but against the Violago spouses. The RTC,however, declared that they are entitled to be indemnifiedby Avelino. The dispositive portion of the RTCs decisionreads:

WHEREFORE, defendant-[third]-party plaintiffs spouses PedroF. Violago and Florencia R. Violago are ordered to deliver to plaintiffBA Finance Corporation, at its principal office the BAFC Building,Gamboa St., Legaspi Village, Makati, Metro Manila the ToyotaCressida car, model 1983, bearing Engine No. 21R-02854117, andwith Serial No. RX60-804614, covered by the deed of chattelmortgage dated August 4, 1983; or if such delivery cannot be made,to pay, jointly and severally, to the plaintiff the sum of P198,003.06together with the penalty [thereon] at three percent (3%) a month,from March 1, 1984, until the amount is fully paid.

In either case, the defendant-third-party plaintiffs are requiredto pay, jointly and severally, to the plaintiff a sum equivalent totwenty-five percent (25%) of P198,003.06 as attorneys fees, andanother amount also equivalent to twenty five percent (25%) of thesaid unpaid balance, as liquidated damages. The defendant-thirdparty-plaintiffs are also required to shoulder the litigation expensesand costs.

As indemnification, third-party defendant Avelino Violago isordered to deliver to defendants-third-party plaintiffs spouses PedroF. Violago and Florencia R. Violago the aforedescribed motor



vehicle;

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8 Id., at pp. 18-19.

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or if such delivery is not possible, to pay to the said spouses the sumof P198,003.06, together with the penalty thereon at three (3%) amonth from March 1, 1984, until the amount is entirely paid.

In either case, the third-party defendant should pay to thedefendant-third-party plaintiffs spouses a sum equivalent totwenty-five percent (25%) of P198,003.06 as attorneys fees, andanother sum equivalent also to twenty-five percent (25%) of thesaid unpaid balance, as liquidated damages.

Third-party defendant Avelino Violago is further ordered toreturn to the third-party plaintiffs the sum of P60,500.00 they paidto him as down payment for the car; and to pay them P15,000.00 asmoral damages; P10,000.00 as exemplary damages; and reimbursethem for all the expenses and costs of the suit.

The counterclaims of the defendants and third-party defendant,for lack of merit, are dismissed.9

The Ruling of the CAPetitioners-spouses and Avelino appealed to the CA. The

spouses argued that the promissory note is a negotiableinstrument; hence, the trial court should have applied theNIL and not the Civil Code. The spouses also asserted thatsince VMSC was not the owner of the vehicle at the time ofsale, the sale was null and void for the failure in the causeor consideration of the promissory note, which in this casewas the sale and delivery of the vehicle. The spouses alsoalleged that BA Finance was not a holder in due course ofthe note since it knew, through its Cebu City branch, thatthe car was never delivered to the spouses.10 On the otherhand, Avelino prayed for the dismissal of the complaintagainst him because he was not a party to the transaction,and for an order to the spouses to pay him moral damagesand costs of suit.

The appellate court ruled that the promissory note was anegotiable instrument and that BA Finance was a holder in



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9 Id.

10 Id., at pp. 20-26.

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due course, applying Secs. 8, 24, and 52 of the NIL. The CAfaulted petitioners for failing to implead VMSC, the seller ofthe vehicle and creditor in the promissory note, as a party intheir Third Party Complaint. Citing Salas v. Court ofAppeals,11 the appellate court reasoned that since VMSC isan indispensable party, any judgment will not bind it or beenforced against it. The absence of VMSC rendered theproceedings in the RTC and the judgment in the ThirdParty Complaint null and void, not only as to the absentparty but also to the present parties, namely theDefendants-Appellants (petitioners herein) and the Third-Party-Defendant-Appellant (Avelino Violago). The CA setaside the trial courts order holding Avelino liable fordamages to the spouses without prejudice to the action ofthe spouses against VMSC and Avelino in a separateaction.12

The dispositive portion of the August 20, 2002 CADecision reads:

IN THE LIGHT OF ALL THE FOREGOING, the appeal ofthe Plaintiffs-Appellants is DISMISSED. The appeal of the Third-Party-Defendant-Appellant is GRANTED. The Decision of theCourt a quo is AFFIRMED, with the modification that the Third-Party Complaint against the Third-Party-Defendant-appellant isDISMISSED, without prejudice. The counterclaims of the Third-Party Defendant Appellant against the Defendants-Appellants areDISMISSED, also without prejudice.13

The spouses Violago sought but were deniedreconsideration by the CA per its Resolution of May 15,2003.

The Issues

Petitioners raise the following issues:



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11 G.R. No. 76788, January 22, 1990, 181 SCRA 296.

12 Rollo, p. 19.

13 Supra note 1, at p. 27.

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WHETHER OR NOT THE HOLDER OF AN INVALIDNEGOTIABLE PROMISSORY NOTE MAY BECONSIDERED A HOLDER IN DUE COURSEWHETHER OR NOT A CHATTEL MORTGAGE SHOULDBE CONSIDERED VALID DESPITE VITIATION OFCONSENT OF, AND THE FRAUD COMMITTED ON,THE MORTGAGORS BY AVELINO, AND THE CLEARABSENCE OF OBJECT CERTAINWHETHER OR NOT THE VEIL OF CORPORATEENTITY MAY BE INVOKED AND SUSTAINEDDESPITE THE FRAUD AND DECEPTION OF AVELINO

The Courts Ruling

The ruling of the appellate court is set aside insofar as itdismissed, without prejudice, the third party complaint ofpetitioners against Avelino thereby effectively absolvingAvelino from any liability under the third party complaint.

In addressing the threshold issue of whether BA Financeis a holder in due course of the promissory note, we mustdetermine whether the note is a negotiable instrument and,hence, covered by the NIL. In their appeal to the CA,petitioners argued that the promissory note is a negotiableinstrument and that the provisions of the NIL, not the CivilCode, should be applied. In the present petition, however,petitioners claim that Article 1318 of the Civil Code14

should be applied since their consent was vitiated by fraud,and, thus, the promissory note does not carry any legaleffect despite its negotiation. Either way, the petitionersarguments deserve no merit.

The promissory note is clearly negotiable. The appellatecourt was correct in finding all the requisites of a negotiableinstrument present. The NIL provides:



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14 Art.1318.There is no contract unless the following requisitesconcur:

(1)Consent of the contracting parties;(2)Object certain which is the subject matter of the contract;(3)Cause of the obligation which is established.

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Section1.Form of Negotiable Instruments.An instrument tobe negotiable must conform to the following requirements:

(a)It must be in writing and signed by the maker or drawer;(b)Must contain an unconditional promise or order to pay a sum

certain in money;(c)Must be payable on demand, or at a fixed or determinable

future time;(d)Must be payable to order or to bearer; and(e)Where the instrument is addressed to a drawee, he must be

named or otherwise indicated therein with reasonable certainty.

The promissory note signed by petitioners reads:

209,601.00 Makati, Metro Manila, Philippines, August 4, 1983

For value received, I/we, jointly and severally, promise to pay tothe order of VIOLAGO MOTOR SALES CORPORATION, its office,the principal sum of TWO HUNDRED NINE THOUSAND SIXHUNDRED ONE ONLY Pesos (P209,601.00), Philippines Currency,with interest at the rate stipulated herein below, in installments asfollows:

Thirty Six (36) successive monthly installments of P5,822.25, thefirst installment to be paid on 9-16-83, and the succeeding monthlyinstallments on the 16th day of each and every succeeding monththereafter until the account is fully paid, provided that the penaltycharge of three (3%) per cent per month or a fraction thereof shallbe added on each unpaid installment from maturity thereof untilfully paid.

x x x xNotice of demand, presentment, dishonor and protest are hereby

waived.

(Sgd.) (Sgd.)



PEDRO F. VIOLAGO

763 Constancia St., Sampaloc,Manila

(Address)

FLORENCIA R.VIOLAGO

same

(Address)

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(Sgd.)Marivic Avaria

(WITNESS)

(Sgd.)Jesus Tuazon

(WITNESS)

PAY TO THE ORDER OF BA FINANCE CORPORATION WITHOUT RECOURSEVIOLAGO MOTOR SALES CORPORATIONBy: (Sgd.)AVELINO A. VIOLAGO, Pres.15

The promissory note clearly satisfies the requirements ofa negotiable instrument under the NIL. It is in writing;signed by the Violago spouses; has an unconditionalpromise to pay a certain amount, i.e., PhP 209,601, onspecific dates in the future which could be determined fromthe terms of the note; made payable to the order of VMSC;and names the drawees with certainty. The indorsement byVMSC to BA Finance appears likewise to be valid andregular.

The more important issue now is whether or not BAFinance is a holder in due course. The resolution of thisissue will determine whether petitioners defense of fraudand nullity of the sale could validly be raised againstrespondent corporation. Sec. 52 of the NIL provides:

Section52.What constitutes a holder in due course.A holderin due course is a holder who has taken the instrument under thefollowing conditions:

(a)That it is complete and regular upon its face;(b)That he became the holder of it before it was overdue, and

without notice that it had been previously dishonored, if such wasthe fact;

(c)That he took it in good faith and for value;



(d)That at the time it was negotiated to him he had no notice ofany infirmity in the instrument or defect in the title of the personnegotiating it.

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15 Rollo, p. 21.

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The law presumes that a holder of a negotiableinstrument is a holder thereof in due course.16 In this case,the CA is correct in finding that BA Finance meets all theforegoing requisites:

In the present recourse, on its face, (a) the PromissoryNote, Exhibit A, is complete and regular; (b) thePromissory Note was endorsed by the VMSC in favor ofthe Appellee; (c) the Appellee, when it accepted the Note,acted in good faith and for value; (d) the Appellee was neverinformed, before and at the time the Promissory Notewas endorsed to the Appellee, that the vehicle sold to theDefendants-Appellants was not delivered to the latter andthat VMSC had already previously sold the vehicle toEsmeraldo Violago. Although Jose Olvido mortgaged thevehicle to Generoso Lopez, who assigned his rights to theBA Finance Corporation (Cebu Branch), the same occurredonly on May 8, 1987, much later than August 4, 1983, whenVMSC assigned its rights over the Chattel Mortgage bythe Defendants-Appellants to the Appellee. Hence, Appelleewas a holder in due course.17

In the hands of one other than a holder in due course, anegotiable instrument is subject to the same defenses as if itwere non-negotiable.18 A holder in due course, however,holds the instrument free from any defect of title of priorparties and from defenses available to prior parties amongthemselves, and may enforce payment

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16 NIL, Sec. 59.

17 Rollo, p. 25.

18 NIL, Sec. 58.



19 Id., Sec. 57.

20 Id., Sec. 24.

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of the instrument for the full amount thereof.19 Since BAFinance is a holder in due course, petitioners cannot raisethe defense of non-delivery of the object and nullity of thesale against the corporation. The NIL considers everynegotiable instrument prima facie to have been issued for avaluable consideration.20 In Salas, we held that a partyholding an instrument may enforce payment of theinstrument for the full amount thereof. As such, the makercannot set up the defense of nullity of the contract of sale.21

Thus, petitioners are liable to respondent corporation for thepayment of the amount stated in the instrument.

From the third party complaint to the present petition,however, petitioners pray that the veil of corporate fiction beset aside and Avelino be adjudged directly liable to BAFinance. Petitioners likewise pray for damages for the fraudcommitted upon them.

In Concept Builders, Inc. v. NLRC, we held:

It is a fundamental principle of corporation law that acorporation is an entity separate and distinct from its stockholdersand from other corporations to which it may be connected. But, thisseparate and distinct personality of a corporation is merely a fictioncreated by law for convenience and to promote justice. So, when thenotion of separate juridical personality is used to defeat publicconvenience, justify wrong, protect fraud or defend crime, or is usedas a device to defeat the labor laws, this separate personality of thecorporation may be disregarded or the veil of corporate fictionpierced. This is true likewise when the corporation is merely anadjunct, a business conduit or an alter ego of another corporation.

x x x xThe test in determining the applicability of the doctrine of

piercing the veil of corporate fiction is as follows:1.Control, not mere majority or complete stock control, but

complete domination, not only of finances but of policy andbusiness practice in respect to the transaction attacked so thatthe corporate entity as to this transaction had at the time noseparate mind, will or existence of its own;



2.Such control must have been used by the defendant tocommit fraud or wrong, to perpetuate the violation of astatutory or other positive legal duty, or dishonest and unjustacts in contravention of plaintiffs legal rights; and

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21 Supra note 11, at pp. 302-303.

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3.The aforesaid control and breach of duty mustproximately cause the injury or unjust loss complained of.22

This case meets the foregoing test. VMSC is a family-owned corporation of which Avelino was president. Avelinocommitted fraud in selling the vehicle to petitioners, avehicle that was previously sold to Avelinos other cousin,Esmeraldo. Nowhere in the pleadings did Avelino refute thefact that the vehicle in this case was already previously soldto Esmeraldo; he merely insisted that he cannot be heldliable because he was not a party to the transaction. Thefact that Avelino and Pedro are cousins, and that Avelinoclaimed to have a need to increase the sales quota, waslikely among the factors which motivated the spouses to buythe car. Avelino, knowing fully well that the vehicle wasalready sold, and with abuse of his relationship with thespouses, still proceeded with the sale and collected the downpayment from petitioners. The trial court found that thevehicle was not delivered to the spouses. Avelino clearlydefrauded petitioners. His actions were the proximate causeof petitioners loss. He cannot now hide behind the separatecorporate personality of VMSC to escape from liability forthe amount adjudged by the trial court in favor ofpetitioners.

The fact that VMSC was not included as defendant inpetitioners third party complaint does not preclude recoveryby petitioners from Avelino; neither would such non-inclusion constitute a bar to the application of the piercing-of-the-corporate-veil doctrine. We suggested as much inArcilla v. Court of Appeals, an appellate proceedinginvolving petitioner Arcillas bid to avoid the adverse CAdecision on the argument that he is not personally liable for



the amount adjudged since the same constitutes a corporateliability which nevertheless cannot even be enforced againstthe corporation which has not been impleaded as a partybelow. In that case, the Court found as well-taken the CAsact of disregarding the separate

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22 G.R. No. 108734, May 29, 1996, 257 SCRA 149, 157-159.

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juridical personality of the corporation and holding itspresident, Arcilla, liable for the obligations incurred in thename of the corporation although it was not a party to thecollection suit before the trial court. An excerpt from Arcilla:

x x x In short, even if We are to assume arguendo that theobligation was incurred in the name of the corporation, thepetitioner [Arcilla] would still be personally liable therefor becausefor all legal intents and purposes, he and the corporation are oneand the same. Csar Marine Resources, Inc. is nothing more than hisbusiness conduit and alter ego. The fiction of separate juridicalpersonality conferred upon such corporation by law should bedisregarded. Significantly, petitioner does not seriously challengethe [CAs] application of the doctrine which permits the piercing ofthe corporate veil and the disregarding of the fiction of a separatejuridical personality; this is because he knows only too well thatfrom the beginning, he merely used the corporation for his personalpurposes.23

WHEREFORE, the CAs August 20, 2002 Decision andMay 15, 2003 Resolution in CA-G.R. CV No. 48489 are SETASIDE insofar as they dismissed without prejudice the thirdparty complaint of petitioners-spouses Pedro and FlorenciaViolago against respondent Avelino Violago. The March 5,1994 Decision of the RTC is REINSTATED andAFFIRMED. Costs against Avelino Violago.

SO ORDERED.

Quisumbing (Chairperson), Ynares-Santiago,** Carpio-Morales and Tinga, JJ., concur.



Judgment and resolution set aside. That of RegionalTrial Court dated March 5, 1994 reinstated and affirmed.

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23 G.R. No. 89804, October 23, 1992, 215 SCRA 120, 129.

** Additional member as per Special Order No. 509 dated July 1,

2008.

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