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    04 Umali Vs CA

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    Honorio Bartholomew Chan
    This case involved a dispute over the foreclosure of land that was used as collateral for debts. Mauricia Castillo's land was used as security for her nephew's company SRC to purchase a tractor, with insurance company ICP also acting as a surety. When SRC defaulted on payments, ICP paid the deficiency and foreclosed on Mauricia's land. The new owners then tried to evict Mauricia. Her successor sued, claiming fraud and seeking to pierce the corporate veil between the companies. However, the court found no clear fraud. There was no justification to disregard the separate corporate identities, as the businesses being interrelated alone is insufficient without proof of intent to defraud creditors. Piercing the corporate veil was

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    04 Umali Vs CA

    Uploaded by

    Honorio Bartholomew Chan
    295 views2 pages
    This case involved a dispute over the foreclosure of land that was used as collateral for debts. Mauricia Castillo's land was used as security for her nephew's company SRC to purchase a tractor, with insurance company ICP also acting as a surety. When SRC defaulted on payments, ICP paid the deficiency and foreclosed on Mauricia's land. The new owners then tried to evict Mauricia. Her successor sued, claiming fraud and seeking to pierce the corporate veil between the companies. However, the court found no clear fraud. There was no justification to disregard the separate corporate identities, as the businesses being interrelated alone is insufficient without proof of intent to defraud creditors. Piercing the corporate veil was

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    04 Umali vs CA

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    This case involved a dispute over the foreclosure of land that was used as collateral for debts. Mauricia Castillo's land was used as security for her nephew's company SRC to purchase a tractor, with insurance company ICP also acting as a surety. When SRC defaulted on payments, ICP paid the deficiency and foreclosed on Mauricia's land. The new owners then tried to evict Mauricia. Her successor sued, claiming fraud and seeking to pierce the corporate veil between the companies. However, the court found no clear fraud. There was no justification to disregard the separate corporate identities, as the businesses being interrelated alone is insufficient without proof of intent to defraud creditors. Piercing the corporate veil was

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    295 views2 pages

    04 Umali Vs CA

    Uploaded by

    Honorio Bartholomew Chan
    This case involved a dispute over the foreclosure of land that was used as collateral for debts. Mauricia Castillo's land was used as security for her nephew's company SRC to purchase a tractor, with insurance company ICP also acting as a surety. When SRC defaulted on payments, ICP paid the deficiency and foreclosed on Mauricia's land. The new owners then tried to evict Mauricia. Her successor sued, claiming fraud and seeking to pierce the corporate veil between the companies. However, the court found no clear fraud. There was no justification to disregard the separate corporate identities, as the businesses being interrelated alone is insufficient without proof of intent to defraud creditors. Piercing the corporate veil was

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Umali vs CA

    189 SCRA 529 Business Organization


    Corporation Law Piercing the Veil of
    Corporate Fiction
    Mauricia Castillo was the administratrix in
    charge over a parcel of land left be Felipe
    Castillo. Said land was mortgaged to the
    Development Bank of the Philippines and
    was about to be foreclosed but then
    Mauricias nephew, Santiago Rivera,
    proposed that they convert the land into 4
    subdivisions so that they can raise the
    necessary money to avoid foreclosure.
    Mauricia agreed. Rivera sought to develop
    said land through his company, Slobec
    Realty Corporation (SRC), of which he was
    also the president. SRC then contracted
    with Bormaheco, Inc. for the purchase of
    one tractor. Bormaheco agreed to sell the
    tractor on an installment basis. At the same
    time, SRC mortgaged said tractor to
    Bormaheco as security just in case SRC will
    default. As additional security, Mauricia and
    other family members executed a surety
    agreement whereby in case of default in
    paying said tractor, the Insurance
    Corporation of the Philippines (ICP) shall
    pay the balance. The surety bond
    agreement between Mauricia and ICP was
    secured by Mauricias parcel of land (same
    land to be developed).
    SRC defaulted in paying said tractor.
    Bormaheco foreclosed the tractor but it
    wasnt enough hence ICP paid the
    deficiency. ICP then foreclosed the property
    of Mauricia. ICP later sold said property to
    Philippine Machinery Parts Manufacturing
    Corporation (PMPMC). PMPMC then
    demanded Mauricia et al to vacate the
    premises of said property.
    While all this was going on, Mauricia died.
    Her successor-administratrix, Buenaflor
    Umali, questioned the foreclosure made by
    ICP. Umali alleged that all the transactions
    are void and simulated hence they were
    defrauded; that through Bormahecos
    machinations, Mauricia was fooled into
    entering into a surety agreement with ICP;
    that Bormaheco even made the premium
    payments to ICP for said surety bond; that
    the president of Bormaheco is a director of
    PMPMC; that the counsel who assisted in all
    the transactions, Atty. Martin De Guzman,
    was the legal counsel of ICP, Bormaheco,
    and PMPMC.
    ISSUE: Whether or not the veil of
    corporate fiction should be pierced.
    HELD: No. There is no clear showing of
    fraud in this case. The mere fact that
    Bormaheco paid said premium payments to
    ICP does not constitute fraud per se. As it
    turned out, Bormaheco is an agent of ICP.
    SRC, through Rivera, agreed that part of
    the payment of the mortgage shall be paid
    for the insurance. Naturally, when Rivera
    was paying some portions of the mortgage
    to Bormaheco, Bormaheco is applying some
    parts thereof for the payment of the
    premium and this was agreed upon
    beforehand.
    Further, piercing the veil of corporate
    fiction is not the proper remedy in order
    that the foreclosure conducted by ICP be
    declared a nullity. The nullity may be
    attacked directly without disregarding the
    separate identity of the corporations
    involved. Further still, Umali et al are not
    enforcing a claim against the individual
    members of the corporations. They are not
    claiming said members to be liable. Umali
    et al are merely questioning the validity of
    the foreclosure.
    The veil of corporate fiction cant be pierced
    also by the simple reason that the
    businesses of two or more corporations are
    interrelated, absent sufficient showing that
    the corporate entity was purposely used as
    a shield to defraud creditors and third
    persons of their rights. In this case, there is
    no justification for disregarding their
    separate personalities.

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