Commercial Law

National Marketing Corporation vs Associated Finance Company, Inc.

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G.R. No. L-20886 – 126 Phil. 196 – 19 SCRA 962 – Mercantile Law – Corporation Law – Piercing the Veil of Corporate Fiction – Fraud Case

In 1958, National Marketing Corporation (NAMARCO) entered into an agreement with Associated Finance Company, Inc. (AFCI). NAMARCO was represented by its general manager Benjamin Estrella. AFCI was represented by its president Francisco Sycip. The agreement was that NAMARCO will deliver raw sugar to AFCI. In exchange, AFCI will deliver refined sugar to NAMARCO. NAMARCO delivered the raw sugar but AFCI failed to comply with its obligation. NAMARCO then demanded AFCI to comply or if not pay the amount of the raw sugar delivered which was at P403,514.28. AFCI was not able to do either hence NAMARCO sued AFCI and Sycip was impleaded.

ISSUE: Whether or not Sycip should be held jointly and severally liable with Associated Finance Company, Inc.

HELD: Yes. In this case, it is proper to pierce the veil of corporate fiction. It was proven that during the time of the agreement, AFCI was already insolvent. Such fact was already known to Sycip. He knew that AFCI was not in a position to transact with NAMARCO because it could not possibly comply with its obligations. Sycip’s assurances that AFCI can deliver said refined sugar products is obviously fashioned to defraud NAMARCO into delivering the raw sugar to AFCI. Consequently, Sycip cannot now seek refuge behind the general principle that a corporation has a personality distinct and separate from that of its stockholders and that the latter are not personally liable for the corporate obligations. He is therefore liable jointly and severally with AFCI to pay the amount claim for the raw sugar delivered plus other damages claimed by NAMARCO with interest.

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