ADALIA B. FRANCISCO and MERRYLAND DEVELOPMENT CORPORATION vs. RITA C. MEJIA

ADALIA B. FRANCISCO and MERRYLAND DEVELOPMENT CORPORATION vs. RITA C. MEJIA
G.R. No. 141617 August 14, 2001

Facts:
1.      Andrea Cordova Vda. de Gutierrez was the registered owner of a parcel of lands.
2.      The property was later subdivided into five lots.
3.      Gutierrez and Cardale Financing and Realty Corporation executed a Deed of Sale with Mortgage relating to the lots, for the consideration of P800,000.00.
4.      Upon the execution of the deed, Cardale paid Gutierrez P171,000.00.
5.      It was agreed that the balance of P629,000.00 would be paid in several installments within five years from the date of the deed, at an interest of nine percent per annum "based on the successive unpaid principal balances."
6.      To secure payment of the balance of the purchase price, Cardale constituted a mortgage on three of the four parcels of land
7.      The encumbrance was annotated upon the certificates of title and the owner's duplicate certificates.
8.      The owner's duplicates were retained by Gutierrez.
9.      On 26 August 1968, owing to Cardale's failure to settle its mortgage obligation, Gutierrez filed a complaint for rescission of the contract
10.  However, Cardale, which was represented by petitioner Adalia B. Francisco in her capacity as Vice- President and Treasurer of Cardale, lost interest in proceeding with the presentation of its evidence and the case lapsed into inactive status for a period of about fourteen years.
11.  In the meantime, the mortgaged parcels of land became delinquent in the payment of real estate taxes which culminated in their levy and auction sale in satisfaction of the tax arrears.
12.  The highest bidder for the three parcels of land was petitioner Merryland Development Corporation whose President and majority stockholder is Francisco.


Ruling:
With specific regard to corporate officers, the general rule is that the officer cannot be held personally liable with the corporation, whether civilly or otherwise, for the consequences of his acts, if he acted for and in behalf of the corporation, within the scope of his authority and in good faith. In such cases, the officer's acts are properly attributed to the corporation. However, if it is proven that the officer has used the corporate fiction to defraud a third party, or that he has acted negligently, maliciously or in bad faith, then the corporate veil shall be lifted and he shall be held personally liable for the particular corporate obligation involved.

The Court, after an assiduous study of this case, is convinced that the totality of the circumstances appertaining conduce to the inevitable conclusion that petitioner Francisco acted in bad faith. The events leading up to the loss by the Gutierrez estate of its mortgage security attest to this. It has been established that Cardale failed to comply with its obligation to pay the balance of the purchase price for the four parcels of land it bought from Gutierrez, which obligation was secured by a mortgage upon the lands. This prompted Gutierrez to file an action for rescission of the Deed of Sale with Mortgage, but the case dragged on for about fourteen years when Cardale, as represented by Francisco, who was Vice-President and Treasurer of the same, lost interest in completing its presentation of evidence.

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