USA College of Law

MONREAL – JD3D
SAN JUAN STRUCTURAL AND STEEL FABRICATORS, INC. vs. COURT OF APPEALS, MOTORICH
Case Name SALES CORPORATION, NENITA LEE GRUENBERG, ACL DEVELOPMENT CORP. and JNM REALTY
AND DEVELOPMENT CORP.
Topic CORPORATION LAW
Case No. | Date G.R. No. 129459 | September 29, 1998
Ponente Panganiban, J.
Doctrine

RELEVANT FACTS
 Plaintiff-appellant San Juan Structural and Steel Fabricators, Inc. entered into an agreement with defendant-
appellee Motorich Sales Corporation, for the transfer to it of a parcel of land in Quezon City
 Identified as Lot 30, Block 1 of Acropolis Greens Subd., in District of Murphy, Quezon City with an
area of 414 sqm., covered by TCT # (362909) 2876
 As agreed, plaintiff paid P100,000 as earnest money/down payment, and the balance to be paid on
or before March 2, 1989
 On March 1, 1989, President of San Juan Structural (SJS) requested for a computation of the balance,
coursed through the broker of Motorich, Linda Aduca, who provided the same.
 The next day, SJS readied the corresponding amount covered by a Metrobank Cashier’s Check
 The parties were supposed to meet in the office of SJS but defendant’s Treasurer, Nenita Lee
Gruenberg did not appear
 Despite repeated demands, Motorich refused to execute the Transfer of Rights/Deed of Assignment
necessary to transfer the TCT.
 ACL Development Corp and JNM Realty & Development Corp were impleaded as necessary parties, since the
TCT is still in the name of the former and the latter is the transferor of right in favor of Motorich.
 Motorich interposed as affirmative defense that its President and Chairman did not sign the agreement, and
signature of its Treasurer is inadequate to bind the defendant.
 RTC ruled in favor of defendant, dismissing plaintiff-appellants complaint.
 CA affirmed with modifications.
 Hence, this petition.

ISSUE:
1. Was there a valid contract of sale between petitioner and Motorich? (main issue – in relation to
Sec. 22, RCC; The Board of Directors or Trustees of a Corporation; Qualification and Term)

2. May the doctrine of piercing the veil of corporate fiction be applied to Motorich?

3. Is the alleged alteration of Gruenbergs testimony as recorded in the transcript of stenographic

notes material to the disposition of this case?

4. Are respondents liable for damages and attorney’s fees?

RULING:
 USA College of Law
MONREAL – JD3D

1. No. There is no valid contract of sale since Motorich never authorized or ratified such sale.

A corporation is a juridical person separate and distinct from its stockholders or members. Accordingly, the
property of the corporation is not the property of its stockholders or members and may not be sold by the
stockholders or members without express authorization from the corporations board of directors.10 Section 23
of BP 68, otherwise known as the Corporation Code of the Philippines, currently Section 22 of RCC, provides:

SEC. 23. The Board of Directors or Trustees. -- Unless otherwise provided in this Code, the corporate
powers of all corporations formed under this Code shall be exercised, all business conducted and all
property of such corporations controlled and dheld by the board of directors or trustees to be elected
from among the holders of stocks, or where there is no stock, from among the members of the
corporation, who shall hold office for one (1) year and until their successors are elected and qualified.

A corporation may only act through its BOD, or, when authorized by its bylaws or Board Resolution, its
officers or agents, in the normal course of business.

In the case at bar, Motorich denies that it authorized its Treasurer, Nenita Gruenberg, to sell the parcel
of land, nor is it a normal function of the treasurer of a corporation. Gruenberg also did not in any way
misrepresent herself as having such power.

2. No. the corporate fiction should be set aside only 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, a matter of proof. In the present case, however, the Court finds no reason to pierce the
corporate veil of Respondent Motorich.

3. No. Petitioner alleged that Nenita’s answer to the Question “Did you ever represent to Mr. Co that you
were authorized by the corporation to sell the property?” (Nenita’s answer was supposedly Yes, which
was then crossed out and replaced by No.).

The Supreme Court ruled that it is insufficient to prove that Nenita was authorized to represent
Motorich, as it should be understood in the whole context of her testimony.

4. No. The Court sustained the findings of the trial and appellate courts, as it was not proven that Motorich,
or Nenita acted fraudulently. Award of damages and attorney’s fees cannot be justified.

Nenita should however, return the P100,000 earnest money due to the principle of solution indebiti.