NAMARCO vs. Associated Finance Co. Inc.

, 19 SCRA 962 19 SCRA 962 Business Organization Corporation Law Piercing the Veil o Corporate !iction !rau" Case In 1958, National Marketing Corporation (NAMARCO) entered into an agreement with Asso iated !inan e Compan", In # (A!CI)# NAMARCO was represented $" its general manager %en&amin 'strella# A!CI was represented $" its president !ran is o (" ip# )he agreement was that NAMARCO will deli*er raw s+gar to A!CI# In e, hange, A!CI will deli*er re-ined s+gar to NAMARCO# NAMARCO deli*ered the raw s+gar $+t A!CI -ailed to ompl" with its o$ligation# NAMARCO then demanded A!CI to ompl" or inot pa" the amo+nt o- the raw s+gar deli*ered whi h was at ./01,51/#28# A!CI was not a$le to do either hen e NAMARCO s+ed A!CI and (" ip was impleaded# ISSUE: 3hether or not (" ip sho+ld $e held &ointl" and se*erall" lia$le with Asso iated !inan e Compan", In # HELD: 4es# In this ase, it is proper to pier e the *eil o- orporate -i tion# It was pro*en that d+ring the time o- the agreement, A!CI was alread" insol*ent# (+ h -a t was alread" known to (" ip# 5e knew that A!CI was not in a position to transa t with NAMARCO $e a+se it o+ld not possi$l" ompl" with its o$ligations# (" ip6s ass+ran es that A!CI an deli*er said re-ined s+gar prod+ ts is o$*io+sl" -ashioned to de-ra+d NAMARCO into deli*ering the raw s+gar to A!CI# Conse7+entl", (" ip annot now seek re-+ge $ehind the general prin iple that a orporation has a personalit" distin t and separate -rom that oits sto kholders and that the latter are not personall" lia$le -or the orporate o$ligations# 5e is there-ore lia$le &ointl" and se*erall" with A!CI to pa" the amo+nt laim -or the raw s+gar deli*ered pl+s other damages laimed $" NAMARCO with interest# GARCIA VS. PEOPLE 118 (CRA /1/ (1999)# Facts: )he R)C -o+nd A g+ilt" o- m+rder and senten ed him to re l+sion perpet+a# A did not interpose a timel" appeal# )h+s, the de ision $e ame -inal# . -iled a spe ial i*il a tion -or mandam+s to ompel the R)C to -orward the re ords o- the ase to the (+preme Co+rt -or a+tomati re*iew# Issue: 3hether the (+preme Co+rt m+st a+tomati all" re*iew a trial o+rt6s de ision on*i ting an a +sed o- a apital o--ense and senten ing him to re l+sion perpet+a# 5eld8 No# It is onl" in ases where the penalt" a t+all" imposed is death that the trial o+rt m+st -orward the re ords o- the ase to the (+preme Co+rt -or a+tomati re*iew o- the on*i tion# Standard Oil Co. of New Jersey v. United States, 221 9#(# 1 (1911), was a ase in whi h the (+preme Co+rt o- the 9nited (tates -o+nd (tandard Oil g+ilt" o-monopoli:ing the petrole+m ind+str" thro+gh a series o- a$+si*e and anti ompetiti*e a tions# )he o+rt;s remed" was to di*ide (tandard Oil into se*eral geographi all" separate and e*ent+all" ompeting -irms# !a ts<edit= %" the 1880s, (tandard Oil was +sing its stranglehold on re-ining apa it" to $egin integrating $a kward into oil e,ploration and r+de oil distri$+tion and -orward into retail distri$+tion o- its re-ined prod+ ts to stores and, e*ent+all", ser*i e stations thro+gho+t the 9nited (tates# (tandard Oil allegedl" +sed its si:e

it was within the power o- the Congress to pre*ent one ompan" -rom a 7+iring n+mero+s others thro+gh means that might ha*e $een onsidered legal in ommon law, $+t still posed a signi-i ant onstraint on ompetition $" mere *irt+e o- their si:e and market power, as implied $" the Antitr+st A t# O*er a period o- de ades, the (tandard Oil Compan" o- New >erse" had $o+ght +p *irt+all" all o- the oil re-ining ompanies in the 9nited (tates# Initiall", the growth o- (tandard Oil was dri*en $" s+perior re-ining te hnolog" and onsisten " in the kerosene prod+ ts (i#e#, prod+ t standardi:ation) that were the main +se o- oil in the earl" de ades o- the ompan";s e,isten e# )he management o- (tandard Oil then rein*ested their pro-its in the a 7+isition o- most o- the re-ining apa it" in the Cle*eland area, then a enter o- oil re-ining, +ntil (tandard Oil ontrolled the re-ining apa it" o- that ke" prod+ tion market# %" 18?0, (tandard Oil was prod+ ing a$o+t 10@ o- the 9nited (tates o+tp+t o- re-ined oil# <1= )his 7+i kl" in reased to 20@ thro+gh the elimination o- the ompetitors in the Cle*eland area# >+dgment<edit= As in the ase against Ameri an )o$a o, whi h was de ided the same da", the Co+rt on l+ded that these -a ts were within the power o- Congress to reg+late +nder the Commer e Cla+se# )he Co+rt re ogni:ed that, Ataken literall",A the term Arestraint o- tradeA o+ld re-er to an" n+m$er o- normal or +s+al ontra ts that do not harm the p+$li # )he Co+rt em$arked on a length" e,egesis o- 'nglish a+thorities rele*ant to the meaning o- the term Arestraint o- trade#A %ased on this re*iew, the Co+rt on l+ded that the term Arestraint o- tradeA had ome to re-er to a ontra t that res+lted in Amonopol" or its onse7+en es#A )he Co+rt identi-ied three s+ h onse7+en es8 higher pri es, red+ ed o+tp+t, and red+ ed 7+alit"# )he Co+rt on l+ded that a ontra t o--ended the (herman A t onl" i- the ontra t restrained trade A+nd+l"ABthat is, i- the ontra t res+lted in one o- the three onse7+en es o- monopol" that the Co+rt identi-ied# A $roader meaning, the Co+rt s+ggested, wo+ld $an normal and +s+al ontra ts, and wo+ld th+s in-ringe li$ert" o- ontra t# )he Co+rt endorsed the r+le o- reason en+n iated $" 3illiam 5oward )a-t in A""#ston Pipe an" Steel Co$pan# %& 'nite" States, 85 !# 2?1 (Cth Cir# 1898), written when the latter had $een Chie- >+dge o- the 9nited (tates Co+rt o- Appeals -or the (i,th Cir +it# )he Co+rt on l+ded, howe*er, that the $eha*ior o- the (tandard Oil Compan" went $e"ond the limitations o- this r+le# >+sti e >ohn Marshall 5arlan wrote a separate opinion on +rring in the res+lt, $+t dissenting in the Co+rt;s adoption o- the r+le o- reason# Among other things, he arg+ed that the Ar+le o- reasonA was a depart+re -rom prior pre edents holding that the (herman A t $anned an" ontra t that restrained trade Adire tl"#A See( e&g&#, 9nited (tates *# >oint )ra--i Ass;n, 1?1 9#(# 505 (1898)# 3hile some s holars ha*e agreed with >+sti e 5arlan;s hara teri:ation o- prior ase law, others ha*e agreed with 3illiam 5oward )a-t, who on l+ded that despite its di--erent *er$al -orm+lation, (tandard Oil;s Ar+le o- reasonA was entirel" onsistent with prior ase law#