SAN JUAN STRUCTURAL AND STEEL FABRICATORS, INC.

, PETITIONER
V.

COURT OF APPEALS, MOTORICH SALES CORPORATION, NENITA LEE GRUENBERG, ACL DEVELOPMENT CORP. AND JNM REALTY AND DEVELOPMENT CORP., RESPONDENTS
GR no 129459 September 29, 1998 Panganiban, J. SV: San Juan and Motoric entered into a contract ! erein Motoric "t roug it# trea#urer, $enita Gruenberg, !i%e o% t e pre#ident and c airman o% motoric & !a# to tran#%er it# rig t# o'er a parce( o% (and to San Juan. San Juan paid a do!npa)ment o% P1**,*** and ! en it !a# read) to pa) t e remaining ba(ance, Motoric did not re#pond to t e demand# o% San Juan pu# t roug !it t e contract. +ne o% t e a((egation# o% San Juan i# t at #ince t e #pou#e# practica(() o!n# a(( t e #ub#cribed capita( #toc, o% Motoric , no board re#o(ution i# needed %or t e contract to 'a(id. S-: .rong. -annot pierce corporate 'ei( i% t ere/# no proo% t at it !a# u#ed to commit %raud etc. 0u#t becau#e t e #pou#e# o!n a(mo#t a(( o% t e #toc,#, piercing # ou(d be a((o!ed. 1(#o t e artic(e# o% corporation o% Motoric c(ear() # o! t at it !a# not intended to be a c(o#e corporation "no (imit on number o% #toc, o(der#, no re#triction on tran#%er o% #toc,# and t at pub(ic o%%ering o% #toc,# i# pro ibited.&

1. San Juan a((eged() entered into an agreement !it Motoric Sa(e# %or t e tran#%er to San Juan a parce( o% (and in Murp ), 2ue3on -it). San Juan paid t e do!npa)ment o% P1**,***, ! i(e t e ba(ance !i(( be paid on or be%ore Marc 2, 1989 2. 1ndre# -o, pre#ident o% San Juan !rote a (etter to Motoric re4ue#ting %or a computation o% t e ba(ance to be paid. 5 i# !a# cour#ed t roug t e bro,er o% Motoric ! o !rote t e computation o% t e ba(ance. 6. San Juan !a# read) !it t e ba(ance co'ered b) a Metroban, -a# ier/# c ec, pa)ab(e to motoric 4. 5 e 2 !ere #uppo#ed to meet at t e o%%ice o% San Juan but Motoric /# trea#urer $enita 7ee Gruenberg did not appear. 5. Motoric Sa(e# -orporation de#pite repeated demand# and in utter di#regard o% it# commitment# ad re%u#ed to e8ecute t e 5ran#%er o% Rig t#9:eed o% 1##ignment ! ic i# nece##ar) to tran#%er t e certi%icate o% tit(e a. ACL Development Corp. is impleaded as a necessary party since Transfer Certificate of Title No. (362909) 2 !6 is still in t"e name of said defendant; ! i(e de%endant J$M Rea(t) < :e'e(opment -orp. i# (i,e!i#e imp(eaded a# a nece##ar) part) in 'ie! o% t e %act t at it i# t e tran#%eror o% rig t in %a'or o% de%endant=appe((ee Motoric Sa(e# -orporation

>. 1-7 and Motoric entered into a deed o% ab#o(ute #a(e ! ere 1-7 tran#%erred t e propert) to Motoric . 1 ne! tit(e in t e name o% Motoric !a# i##ued ?. 1# a re#u(t o% $enita and Motoric /# bad %ait in re%u#ing to e8ecute a tran#%er o% Rig t#9deed o% a##ignment, San Juan #u%%ered mora( and nomina( damage# "5**,***&, e8emp(ar) damage# "1**,***&, and b) rea#on o% Motoric /# bad %ait in re%u#ing to e8ecute a tran#%er o% rig t#9deed o% a##ignment in %a'or o% San Juan, it (o#t t e opportunit) to con#truct a re#identia( bui(ding in t e #um o% P1**,***. 8. Motoric and $enita/# an#!er a. Pre#ident and c airman o% Motoric did not #ign t e agreement b. 5 at $enita/# #ignature i# inade4uate to bind Motoric , Mr. Gruenberg/# #ignature i# re4uired "Pre#ident and - airman& c. San Juan ,ne! t i# %rom t e beginning. d. 5 e) agreed t at i% t e pa)ment !a# in c ec,, t e) !i(( meet at a ban, de#ignated b) San Juan ! ere t e) !i(( enca# t e c ec, and #ign t e 5ran#%er o% Rig t#9 :eed. @ut $enita on() in%ormed t em o% t e a'ai(abi(it) o% t e c ec, a%ter ban,ing our# 9. R5- di#mi##ed t e comp(aint. $o e'idence to # o! t at $enita ad aut orit) to #ign t e contract. $or !a# t ere e'idence to # o! t at t e corporation rati%ied t e act. 1*. -1 a%%irmed !it modi%ication. Re%und t e P1**,*** paid a# do!npa)ment to San Juan. ISSUES 1. Was the e a !a"#$ %&'t a%t &( sa"e )et*ee' Sa' J+a' a'$ M&t& #%h, -. Ma. the $&%t #'e &( /#e %#'0 the !e#" &( %& /& ate (#%t#&' )e a//"#e$ t& 1&t& #%h, 2the &'". e"e!a't #ss+e3 4. Is the a""e0e$ a"te at#&' &( G +e')e 05s test#1&'. as e%& $e$ #' the t a's% #/t &( ste'&0 a/h#% '&tes 1ate #a" t& the $#s/&s#t#&' &( the %ase, 4. 1re re#pondent# (iab(e %or damage# and 1ttorne)/# %ee#A

1. $o. 5rue t ere !a# an agreement #igned b) Gruenberg and -o but it cannot bind Motoric becau#e it ne'er aut ori3ed or rati%ied #uc #a(e. 1 corporation i# a 0uridica( per#on #eparate and di#tinct %rom it# #toc, o(der# or member#. 5 e propert) o% t e corporation i# not t e propert) o% it# #toc, o(der# or member# and ma) not be #o(d b) t e #toc, o(der or member# !it out e8pre## aut ori3ation %rom t e corporation/# board o% director# a corporate o%%icer or agent ma) repre#ent and bind t e corporation in tran#action# !it 6rd per#on# to t e e8tent t at t e aut orit) to do #o a# been con%erred upon im, and t i# inc(ude# po!er# ! ic a'e been intentiona(() con%erred, and a(#o #uc po!er# a#, in t e u#ua( cour#e o%

t e particu(ar bu#ine##, are incidenta( to, or ma) be imp(ied %rom, t e po!er# intentiona(() con%erred, po!er# added b) cu#tom and u#age, a# u#ua(() pertaining to t e particu(ar o%%icer or agent, and #uc apparent po!er# a# t e corporation a# cau#ed per#on# dea(ing !it t e o%%icer or agent to be(ie'e t at it a# con%erred per#on# dea(ing !it an a##umed agent, ! et er t e a##umed agenc) be a genera( or #pecia( one bound at t eir peri( Motoric categorica(() denie# t at it e'er aut ori3ed $enita Gruenberg, it# trea#urer, to #e(( t e #ub0ect parce( o% (and San Juan ad t e burden o% pro'ing t at $enita !a# in %act aut ori3ed to repre#ent and bind Motoric in t e tran#action. B5 %ai(ed to do #o. San Juan cannot a##ume t at b) 'irtue o% er po#ition, # e !a# aut ori3ed to #e(( t e propert) o% t e corporation. Se((ing i# ob'iou#() %oreign to a corporate trea#urerC# %unction. San Juan a(#o a((eged t at Motoric rati%ied t e act o% $enita o Bn t i# ca#e, t ere i# a c(ear ab#ence o% proo% t at Motoric e'er aut ori3ed $enita Gruenberg, or made it appear to an) t ird per#on t at # e ad t e aut orit), to #e(( it# (and or to recei'e t e earne#t mone). $eit er !a# t ere an) proo% t at Motoric rati%ied, e8pre##() or imp(ied(), t e contract. Petitioner re#t# it# argument on t e receipt ! ic , o!e'er, doe# not pro'e t e %act o% rati%ication. 5 e document i# a and=!ritten one, not a corporate receipt, and it bear# on() $enita GruenbergC# #ignature. -ertain(), t i# document a(one doe# not pro'e t at er act# !ere aut ori3ed or rati%ied b) Motoric .

-. N&. San Juan a(#o argue# t at t e 'ei( o% corporate %iction o% Motoric # ou(d be pierced becau#e Motoric i# a c(o#e corporation. "#p#. Re)na(do Gruenberg and $enita o!ned a(( or a(mo#t a(( or 99.8>>D o% #ub#cribed capita( #toc,&. $enita needed no aut ori3ation %rom t eboard to enter into t e contract. 5 at t e compan) can be treated a# a c(o#e corporation ! ic can be bound b) t e act# o% it# principa( #toc, o(der ! o need no #peci%ic aut orit). S-: i##ue !a# rai#ed be(ated() E'en i% it !a#n/t, t e court #ti(( %ind# no rea#on to up o(d t e argument. o t e 'ei( can be di#regarded ! en it i# uti(i3ed a# a # ie(d to commit %raud, i((ega(it) or ine4uit); de%eat pub(ic con'enience; con%u#e (egitimate i##ue#; or #er'e a# a mere a(ter ego or bu#ine## conduit o% a per#on or an in#trumenta(it), agenc) or ad0unct o% anot er corporation San Juan utter() %ai(ed to e#tab(i# t at #aid corporation !a# %ormed, or t at it i# operated, %or t e purpo#e o% # ie(ding an) a((eged %raudu(ent or i((ega( acti'itie# o% it# o%%icer# or #toc, o(der#; or t at t e #aid 'ei( !a# u#ed to concea( %raud, i((ega(it) or ine4uit) at t e e8pen#e o% t ird per#on# (i,e petitioner.

Bt a((eged t at Motoric i# a c(o#e corporation "#ee #ec. 9>&

@ut t ere !a# no # o!ing t at t e number o% #toc, o(der# # a(( not e8ceed 2*, or a preemption o% # are# i# re#tricted in %a'or o% an) #toc, o(der or o% t e corporation or (i#ting it# #toc,# in an) e8c ange or ma,ing a pub(ic o%%ering i# pro ibited. From it# artic(e#, it i# c(ear t at Re#pondent Motoric i# not a c(o#e corporation Motoric doe# not become one eit er, 0u#t becau#e Spou#e# Re)na(do and $enita Gruenberg o!ned 99.8>>D o% it# #ub#cribed capita( #toc,.

San Juan cited Manue( :u(a) enterpri#e# '. -1 ! erein t e court e(d t at a board re#o(ution aut ori3ing t e #a(e e8ecuted b) t e pre#ident i# nece##ar). @ut t e ca#e i# di%%erent in t e ca#e at bar #ince it !a# $enita t e trea#urer ! o entered into t e contract. t ere are e8ceptiona( ca#e# ! ere Gan action b) a director, ! o #ing() i# t e contro((ing #toc, o(der, ma) be con#idered a# a binding corporate act and a board action a# not ing more t an a mere %orma(it). Bn t i# ca#e $enita i# not t e #o(e contro((ing #toc, o(der o% Motoric . Granting arguendo t at t e corporate 'ei( o% Motoric i# to be di#regarded, t e #ub0ect parce( o% (and !ou(d t en be treated a# con0uga( propert) o% Spou#e# Gruenberg, becau#e t e #ame !a# ac4uired during t eir marriage. $enita Gruenberg cou(d not a'e e%%ected a #a(e o% t e #ub0ect (ot becau#e t ere i# no co= o!ner# ip bet!een t e #pou#e# in t e propertie# o% t e con0uga( partner# ip o% gain#. 1##uming %urt er, %or t e #a,e o% argument, t at t e #pou#e#C propert) regime i# t e ab#o(ute communit) o% propert), t e #a(e !ou(d #ti(( be in'a(id. Hnder t i# regime, Ga(ienation o% communit) propert) mu#t a'e t e !ritten con#ent o% t e ot er #pou#e or e aut orit) o% t e court !it out ! ic t e di#po#ition or encumbrance i# 'oid

6. - a((enged portion o% t e tran#cript o% #tenograp ic note# immateria( $enita Gruenberg did not te#ti%) t at Motoric ad aut ori3ed er to #e(( it# propert).

4. :amage# and 1tt)/# %ee# an a!ard o% damage# or attorne)C# %ee# cannot be 0u#ti%ied. 5 e a((egation# o% San Juan (ac,# ba#i#. Bndeed, petitionerC# c(aim o% %raud and bad %ait i# un#ub#tantiated and %ai(# to per#uade t e -ourt. Bndubitab(), petitioner appear# to be t e 'ictim o% it# o!n o%%icerC# neg(igence in entering into a contract !it and pa)ing an unaut ori3ed o%%icer o% anot er corporation. $enita Gruenberg # ou(d be ordered to return to petitioner t e amount # e recei'ed a# earne#t mone), a# Gno one # a(( enric im#e(% at t e e8pen#e o% anot er.G