Bustos v. Millians Shoe, Inc. (G.R. 185024, 4 April 2017)

 

Bustos v. Millians Shoe, Inc. (G.R. 185024, 4 April 2017)

Doctrine: Stockholders liab in close corp not automatically liab. Only liab to the extent that the stockholders are actively engaged in the management or operation of the business and affairs of a close corporation and if corpo has not secured adequate liability insurance. 

Facts: 

Sps Fernando and Amelia Cruz owned a parcel of land that was levied for nonpayment of real estate taxes. The City Treasurer of Marikina auctioned off the property, with Petitioner as the winning bidder. He then applied for the cancellation of TCT. The Regional Trial Court granted the cancellation of the previous title and issued a new one under the name of petitioner.

Subsequently, notices of lis pendens were annotated to Bustos’s Title indicating that SEC Corp. Case No. 036-04, which was filed before the RTC involved the rehabilitation proceedings for MSI, covered the subject property and included it in the Stay Order issued by the RTC. Petitioner moved for the exclusion of the subject property from the Stay Order. He claimed that the lot belonged to Spouses Cruz who were mere stockholders and officers of MSL. He further argued that since he had won the bidding of the property, the auctioned property could no longer be part of the Stay Order. The RTC denied the entreaty of petitioner on the ground that the period of redemption has not yet lapsed.

CA ruled that the subject land which secured several mortgage liens for the account of MSI remains to be an asset of the Cruz Spouses, who are the stockholders and/or officers of MSI, a close corporation. Incidentally, as an exception to the general rule, in a close corporation, the stockholders and/or officers usually manage the business of the corporation and are subject to all liabilities of directors. Thus, the Cruz Spouses being stockholders of MSI are personally liable for the latter's debt and obligations.

Issue: Whether the CA correctly considered the properties of Spouses Cruz answerable for the obligations of MSI.

Held: 

No, CA’s decision characterized respondent spouses as stockholders of a close corporation who, as such, are liable for its debts. There is no basis for finding that MSI is a close corporation.

(1) The courts a quo did not at all refer to the Articles of Incorporation of MSI. For this reason alone, the CA rulings should be set aside. 

(2) CA seriously erred in portraying the import of Section 97 of the Corp Code making the stockholders automatically liable for Corp’s debts. 

(3) Stay orders only cover claims against the corporation, guarantors and sureties. Properties merely owned by stockholders cannot be included in the inventory of assets of a corporation under rehabilitation.

CA seriously erred in portraying the import of Section 97 of the Corporation Code. Citing that provision, the CA concluded that "in a close corporation, the stockholders and/or officers usually manage the business of the corporation and are subject to all liabilities of directors, i.e. personally liable for corporate debts and obligations."

However, Section 97 of the Corporation Code only specifies that "the stockholders of the corporation shall be subject to all liabilities of directors." Nowhere in that provision do we find any inference that stockholders of a close corporation are AUTOMATICALLY liable for corporate debts and obligations.

Parenthetically, only Sec. 100, par 5, of the Corp Code explicitly provides for personal liability of stockholders of close corporation: To the extent that the stockholders are actively engaged in the management or operation of the business and affairs of a close corporation, the stockholders shall be held to strict fiduciary duties to each other and among themselves. Said stockholders shall be personally liable for corporate torts unless the corporation has obtained reasonably adequate liability insurance.

In the case at bar, neither RTC nor the CA discussed the factual circumstance required above. Thus, general doctrine of separate juridical personality should be applied. Being an officer or a stockholder of a corporation does not make one's property the property also of the corporation. 

In addition: Stay orders should only cover those claims directed against corporations or their properties, against their guarantors, or their sureties who are not solidarily liable with them, to the exclusion of accommodation mortgagors. To repeat, properties merely owned by stockholders cannot be included in the inventory of assets of a corporation under rehabilitation. Given that the true owner of the subject property is not the corporation, petitioner cannot be considered a creditor of MSI but a holder of a claim against respondent spouses.