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[ G.R. No. 131019. July 19, 1999]

BUENO INDUSTRIAL & DEV'T CORP. vs. CA, et al.

THIRD DIVISION

Gentlemen:

Quoted hereunder for your information, is a resolution of this Court dated JUL 19, 1999.

G.R. No. 131019 (Bueno Industrial & Development Corporation vs. Court of Appeals and P.N. Roa Realty Corporation.)

For the Court's consideration I the instant petition questioning the decision of the Court of Appeals dated October 13, 1997, in CA-G.R. SP No. 39415, granting herein private respondent's petition for certiorari and prohibition with prayer for the issuance of a writ of preliminary injunction and/or temporary restraining order.

The controversy began as early s 1964, when R.C. Aquino Timber and Plywood Co. (TIMPLY) filed an action before the Court of First Instance of Agusan (Agusan CFI) against herein petitioner Bueno Industrial & Development Corporation (BIDCOR) over the use of and the cutting of logs along the former's right-to-way. BIDCOR filed an answer with counterclaim and counter-petition for prohibition, injunction and mandamus, praying for damages it suffered when TIMPLY allegedly hauled logs cut by BIDCOR.

In November 1979, during the pendency of the action, TMPLY sold and transferred its shares of stock to P.N. Roa Enterprises, Inc. (PNREI), represented by its President Pedro Roa, Jr. In 1984, BIDCOR filed a third-party complaint against PNREI before Branch 1 of the Regional Trial Court of Butuan City (Butuan RTC) which took over the case from the defunct Agusan CFI. Third-party defendants failed to file an answer, so, upon BIDCOR's motion, they were declared in default.

On April 1991, the trial court rendered judgment, dismissing TIMPLY's petition and granting the prayers of BIDCOR as against TIMPLY, PNREI and Roa, Jr., who were held solidarily liable to BIDCOR for actual damages amounting to more than P118 million, plus a 14% annual interest from the counterclaim's inception on January 19, 1964, until it is fully paid; moral and exemplary damages in the sum of P300,000.00; attorney's fees and expenses of litigation, as well as the costs of the suit.

Thus, BIDCOR moved for partial execution of the judgment pending appeal, "as far as third-party defendants are concerned," referring to PNREI and Roa, Jr. This was granted by the court a quo, and a writ of execution was issued on January 21, 1994, against TIMPLY, PNREI and Roa, Jr. Barely two weeks later, a notice of levy was issued against certain titles, rights, interest, shares and participation of said defendants, including properties belonging to herein private respondent P.N. Roa Realty Corporation (PNRRC).

Thus, before the Regional Trial Court of Cagayan de Oro (Cagayan RTC), PNRRC challenged the propriety of execution and levy over its properties. It claimed, among other matters, that it had a juridical personality separate and distinct from that of PNREI and Roa, Jr. On March 28, 1995, the Cagayan RTC rendered a summary judgment in favor of PNRRC, declaring that the levy made on its properties was null and void. In view of this decision, PNREI and Roa, Jr. filed before the Butuan RTC a motion to recall execution of judgment and to dismiss the third-party complaint. On December 14, 1995, the trial court issued a resolution, denying said motion on the ground that being "owned, managed of the same family," Roa Wood Industries, Inc. (TIMPLY's successor-in-interest) PNREI and PNRRC were "found to be one and the same and that the properties registered and/or declared in the name of (PNRRC) can be treated as also those of the other two corporations."

On appeal, the Court of Appeals reversed the trial court's ruling and stated thus:

"The Supreme Court lays down the test in determining the applicability of piercing the veil of corporate fiction as follows:

"1. Control, note mere majority or complete stock control, but complete domination, not only of finances but of policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time n separate mind, will or existence of its own.

2. Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of s statutory or other positive legal duty, or dishonest and unjust act in contravention of plaintiff's legal rights; and

3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of. (Citations omitted)'

x x x��� x x x��� x x x.

It must be borne in mind, however, that a corporation's distinct personality will be disregarded only when it is 'so controlled and its affairs so conducted as to make it merely an instrumentality, agency or conduit of another' or its operations are 'so merged with those of the stockholders as to be practically indistinguishable from them."'

ACCORDINGLY, the Court finding no error in the assailed judgment of the Court of Appeals as would warrant a reversal of the trial court's resolution, the instant petition for review is hereby DENIED."

Very truly yours,

(Sgd.) JULIETA Y. CARREON

Clerk of Court

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