TRADERS ROYAL BANK vs. COURT OF APPEALS

TRADERS ROYAL BANK vs. COURT OF APPEALS, FILRITERS GUARANTY ASSURANCE CORPORATION and CENTRAL BANK of the PHILIPPINES

G.R. No. 93397 March 3, 1997

Facts:

1.      Defendant Filriters is the registered owner of CBCI (Central Bank Certificate of Indebtedness).

2.      Under a deed of assignment, Filriters transferred CBCI to Philippine Underwriters Finance Corporation.

3.      Subsequently, Philfinance transferred CBCI, which was still registered in the name of Filriters, to appellant TRB.

4.      The transfer was made under a repurchase agreement, granting Philfinance the right to repurchase the instrument.

5.      When Philfinance failed to buy back the note on maturity date, it executed a deed of assignment, conveying to appellant TRB all its right and the title to CBCI.

6.      TRB then sought the transfer and registration of in its name before the Security and Servicing Department of the Central Bank.

7.      Central Bank, however, refused to transfer and registration in view of an adverse claim filed by defendant Filriters.

8.      The lower court said that: Alfredo O. Banaria, who signed the deed of assignment purportedly for and on behalf of Filriters, did not have the necessary written authorization from the Board of Directors of Filriters to act for the latter. The assignment did not therefore bind Filriters.

9.      In sum, Philfinance acquired no title or rights under CBCI which it could assign or transfer to Traders Royal Bank and which the latter can register with the Central Bank.

10.  Petitioner claims; Since Philfinance own about 90% of Filriters and the two companies have the same corporate officers, if the principle of piercing the veil of corporate entity were to be applied in this case, then TRB's payment to Philfinance for the CBCI purchased by it could just as well be considered a payment to Filriters, the registered owner of the CBCI as to bar the latter from claiming, as it has, that it never received any payment for that CBCI sold and that said CBCI was sold without its authority.

Issue:

            Whether or not piercing corporate veil of the two corporations is justified

Ruling:

            The corporate separateness between Filriters and Philfinance remains, despite the petitioner’s insistence on the contrary. For one, other than the allegation that Filriters is 90% owned by Philfinance, and the identity of one shall be maintained as to the other, there is nothing else which could lead the court under circumstance to disregard their corporate personalities.

Though it is true that when valid reasons exist, the legal fiction that a corporation is an entity with a juridical personality separate from its stockholders and from other corporations may be disregarded, in the absence of such grounds, the general rule must upheld. The fact that Filfinance owns majority shares in Filriters is not by itself a ground to disregard the independent corporate status of Filriters. In Liddel& Co., Inc. vs. Collector of Internal Revenue, the mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself a sufficient reason for disregarding the fiction of separate corporate personalities.

In the case at bar, there is sufficient showing that the petitioner was not defrauded at all when it acquired the subject certificate of indebtedness from Philfinance.

On its face the subject certificates states that it is registered in the name of Filriters. This should have put the petitioner on notice, and prompted it to inquire from Filriters as to Philfinance's title over the same or its authority to assign the certificate. As it is, there is no showing to the effect that petitioner had any dealings whatsoever with Filriters, nor did it make inquiries as to the ownership of the certificate.