the sum of P1,000 on account of the filing of this

Republic of the Philippines

ANTONIO VAZQUEZ, petitioner, The trial court rendered judgment ordering the
vs. defendant Antonio Vazquez to pay to the plaintiff
FRANCISCO DE BORJA, respondent. the sum of P3,175.20 plus the sum of P377.50, with
legal interest on both sums, and absolving the
x---------------------------------------------------------x defendant Fernando Busuego (treasurer of the
G.R. No. L-48931 February 23, 1944 corporation) from the complaint and the plaintiff
from the defendant Antonio Vazquez' counterclaim.
FRANCISCO DE BORJA, petitioner, Upon appeal to the Court of Appeals, the latter
vs. modified that judgment by reducing it to the total
ANTONIO VAZQUEZ, respondent. sum of P3,314.78, with legal interest thereon and
OZAETA, J.: the costs. But by a subsequent resolution upon the
defendant's motion for reconsideration, the Court of
This action was commenced in the Court of First
Appeals set aside its judgment and ordered that the
Instance of Manila by Francisco de Borja against
case be remanded to the court of origin for further
Antonio Vazquez and Fernando Busuego to recover
proceedings. The defendant Vazquez, not being
from them jointly and severally the total sum of
agreeable to that result, filed the present petition
P4,702.70 upon three alleged causes of action, to
for certiorari (G.R. No. 48930) to review and reverse
wit: First, that in or about the month of January,
1932, the defendants jointly and severally obligated the judgment of the Court of Appeals; and the
plaintiff Francisco de Borja, excepting to the
themselves to sell to the plaintiff 4,000 cavans of
palay at P2.10 per cavan, to be delivered during the resolution of the Court of Appeals whereby its
original judgment was set aside and the case was
month of February, 1932, the said defendants
ordered remanded to the court of origin for further
having subsequently received from the plaintiff in
proceedings, filed a cross-petition for certiorari (G.R.
virtue of said agreement the sum of P8,400; that the
No. 48931) to maintain the original judgment of the
defendants delivered to the plaintiff during the
Court of Appeals.
months of February, March, and April, 1932, only
2,488 cavans of palay of the value of P5,224.80 and The original decision of the Court of Appeals and its
refused to deliver the balance of 1,512 cavans of subsequent resolutions on reconsideration read as
the value of P3,175.20 notwithstanding repeated follows:
demands. Second, that because of defendants' Es hecho no controvertido que el 25 de
refusal to deliver to the plaintiff the said 1,512 Febrero de 1932, el demandado-apelante
cavans of palay within the period above mentioned, vendio al demandante 4,000 cavanes de
the plaintiff suffered damages in the sum of P1,000. palay al precio de P2.10 el cavan, de los
And, third, that on account of the agreement above cuales, dicho demandante solamente recibio
mentioned the plaintiff delivered to the defendants
2,583 cavanes; y que asimismo recibio para
4,000 empty sacks, of which they returned to the su envase 4,000 sacos vacios. Esta provbado
plaintiff only 2,490 and refused to deliver to the que de dichos 4,000 sacos vacios solamente
plaintiff the balance of 1,510 sacks or to pay their se entregaron, 2,583 quedando en poder del
value amounting to P377.50; and that on account of demandado el resto, y cuyo valor es el de
such refusal the plaintiff suffered damages in the P0.24 cada uno. Presentada la demanda
sum of P150. contra los demandados Antonio Vazquez y
The defendant Antonio Vazquez answered the Fernando Busuego para el pago de la
complaint, denying having entered into the contract cantidad de P4,702.70, con sus intereses
mentioned in the first cause of action in his own legales desde el 1.o de marzo de 1932 hasta
individual and personal capacity, either solely or su completo pago y las costas, el Juzgado de
together with his codefendant Fernando Busuego, Primera Instancia de Manila el asunto
and alleging that the agreement for the purchase of condenando a Antonio Vazquez a pagar al
4,000 cavans of palay and the payment of the price demandante la cantidad de P3,175.20, mas
of P8,400 were made by the plaintiff with and to the la cantidad de P377.50, con sus intereses
Natividad-Vasquez Sabani Development Co., Inc., a legales, absolviendo al demandado Fernando
corporation organized and existing under the laws of Busuego de la demanda y al demandante de
the Philippines, of which the defendant Antonio la reconvencion de los demandados, sin
Vazquez was the acting manager at the time the especial pronunciamiento en cuanto a las
transaction took place. By way of counterclaim, the costas. De dicha decision apelo el
said defendant alleged that he suffered damages in demandado Antonio Vazquez, apuntado
como principal error el de que el habia sido demandante, mas la suma de P339.08 como
condenado personalmente, y no la importe de los 1,417 sacos vacios, que dejo
corporacion por el representada. de devolver, a razon de P0.24 el saco, total
P3,314.78, con sus intereses legales desde la
Segun la preponderancia de las pruebas, la
interposicion de la demanda y las costas de
venta hecha por Antonio Vazquez a favor de
ambas instancias.
Francisco de Borja de los 4,000 cavanes de
palay fue en su capacidad de Presidente Vista la mocion de reconsideracion de
interino y Manager de la corporacion nuestra decision de fecha 13 de Octubre de
Natividad-Vazquez Sabani Development Co., 1942, y alegandose en la misma que cuando
Inc. Asi resulta del Exh. 1, que es la copia al el apelante vendio los 1,500 cavanes de
carbon del recibo otorgado por el palay a Ah Phoy, la corporacion todavia tenia
demandado Vazquez, y cuyo original lo habia bastante existencia de dicho grano, y no
perdido el demandante, segun el. Asi estando dicho extremo suficientemente
tambien consta en los libros de la discutido y probado, y pudiendo variar el
corporacion arriba mencionada, puesto que resultado del asunto, dejamos sin efecto
en los mismos se ha asentado tanto la nuestra citada decision, y ordenamos la
entrada de los P8,400, precio del palay, devolucion de la causa al Juzgado de origen
como su envio al gobierno en pago de los para que reciba pruebas al efecto y dicte
alquileres de la Hacienda Sabani. Asi mismo despues la decision correspondiente.
lo admitio Francisco de Borja al abogado Sr. Upon consideration of the motion of the
Jacinto Tomacruz, posterior presidente de la attorney for the plaintiff-appellee in case CA-
corporacion sucesora en el arrendamiento de G.R. No. 8676, Francisco de Borja vs. Antonio
la Sabani Estate, cuando el solicito sus Vasquez et al., praying, for the reasons
buenos oficios para el cobro del precio del therein given, that the resolution of
palay no entregado. Asi igualmente lo December 22, 1942, be reconsidered:
declaro el que hizo entrega de parte del Considering that said resolution remanding
palay a Borja, Felipe Veneracion, cuyo the case to the lower court is for the benefit
testimonio no ha sido refutado. Y asi se of the plaintiff-appellee to afford him
deduce de la misma demanda, cuando se opportunity to refute the contention of the
incluyo en ella a Fernando Busuego, tesorero defendant-appellant Antonio Vazquez,
de la Natividad-Vazquez Sabani Development motion denied.
Co., Inc.
The action is on a contract, and the only issue
Siendo esto asi, la principal responsable pleaded and tried is whether the plaintiff entered
debe ser la Natividad-Vazquez Sabani into the contract with the defendant Antonio
Development Co., Inc., que quedo insolvente Vazquez in his personal capacity or as manager of
y dejo de existir. El Juez sentenciador the Natividad-Vazquez Sabani Development Co., Inc.
declaro, sin embargo, al demandado Vazquez The Court of Appeals found that according to the
responsable del pago de la cantidad preponderance of the evidence "the sale made by
reclamada por su negligencia al vender los Antonio Vazquez in favor of Francisco de Borja of
referidos 4,000 cavanes de palay sin
4,000 cavans of palay was in his capacity as acting
averiguar antes si o no dicha cantidad existia president and manager of the corporation Natividad-
en las bodegas de la corporacion. Vazquez Sabani Development Co., Inc." That finding
Resulta del Exh. 8 que despues de la venta of fact is final and, it resolving the only issue
de los 4,000 cavanes de palay a Francisco de involved, should be determinative of the result.
Borja, el mismo demandado vendio a Kwong The Court of Appeals doubly erred in ordering that
Ah Phoy 1,500 cavanes al precio de P2.00 el the cause be remanded to the court of origin for
cavan, y decimos 'despues' porque esta further trial to determine whether the corporation
ultima venta aparece asentada despues de la had sufficient stock of palay at the time appellant
primera. Segun esto, el apelante no sold, 1500 cavans of palay to Kwong Ah Phoy. First,
solamente obro con negligencia, sino if that point was material to the issue, it should have
interviniendo culpa de su parte, por lo que de been proven during the trial; and the statement of
acuerdo con los arts. 1102, 1103 y 1902 del the court that it had not been sufficiently discussed
Codigo Civil, el debe ser responsable and proven was no justification for ordering a new
subsidiariamente del pago de la cantidad trial, which, by the way, neither party had solicited
objecto de la demanda. but against which, on the contrary, both parties now
En meritos de todo lo expuesto, se confirma vehemently protest. Second, the point is, in any
la decision apelada con la modificacion de event, beside the issue, and this we shall now
que el apelante debe pagar al apelado la discuss in connection with the original judgment of
suma de P2,295.70 como valor de los 1,417 the Court of Appeals which the plaintiff cross-
cavanes de palay que dejo de entregar al petitioner seeks to maintain.
The action being on a contract, and it appearing culpa aquiliana. The fault and negligence referred to
from the preponderance of the evidence that the in articles 1101-1104 of the Civil Code are those
party liable on the contract is the Natividad-Vazquez incidental to the fulfillment or nonfullfillment of a
Sabani Development Co., Inc. which is not a party contractual obligation; while the fault or negligence
herein, the complaint should have been dismissed. referred to in article 1902 is the culpa aquiliana of
Counsel for the plaintiff, in his brief as respondent, the civil law, homologous but not identical to tort of
argues that altho by the preponderance of the the common law, which gives rise to an obligation
evidence the trial court and the Court of Appeals independently of any contract. (Cf. Manila R.R. Co.
found that Vazquez celebrated the contract in his vs. Cia. Trasatlantica, 38 Phil., 875, 887-890;
capacity as acting president of the corporation and Cangco vs. Manila R.R. Co., 38 Phil. 768.) The fact
altho it was the latter, thru Vazquez, with which the that the corporation, acting thru Vazquez as its
plaintiff had contracted and which, thru Vazquez, manager, was guilty of negligence in the fulfillment
had received the sum of P8,400 from Borja, and of the contract, did not make Vazquez principally or
altho that was true from the point of view of a legal even subsidiarily liable for such negligence. Since it
fiction, "ello no impede que tambien sea verdad lo was the corporation's contract, its nonfulfillment,
alegado en la demanda de que la misma persona de whether due to negligence or fault or to any other
Vasquez fue la que contrato con Borja y que la cause, made the corporation and not its agent
misma persona de Vasquez fue quien recibio la liable.
suma de P8,400." But such argument is invalid and On the other hand if independently of the contract
insufficient to show that the president of the Vazquez by his fault or negligence cause damaged
corporation is personally liable on the contract duly
to the plaintiff, he would be liable to the latter under
and lawfully entered into by him in its behalf. article 1902 of the Civil Code. But then the plaintiff's
It is well known that a corporation is an artificial cause of action should be based on culpa aquiliana
being invested by law with a personality of its own, and not on the contract alleged in his complaint
separate and distinct from that of its stockholders herein; and Vazquez' liability would be principal and
and from that of its officers who manage and run its not merely subsidiary, as the Court of Appeals has
affairs. The mere fact that its personality is owing to erroneously held. No such cause of action was
a legal fiction and that it necessarily has to act thru alleged in the complaint or tried by express or
its agents, does not make the latter personally liable implied consent of the parties by virtue of section 4
on a contract duly entered into, or for an act lawfully of Rule 17. Hence the trial court had no jurisdiction
performed, by them for an in its behalf. The legal over the issue and could not adjudicate upon it
fiction by which the personality of a corporation is (Reyes vs. Diaz, G.R. No. 48754.) Consequently it
created is a practical reality and necessity. Without was error for the Court of Appeals to remand the
it no corporate entities may exists and no corporate case to the trial court to try and decide such issue.
business may be transacted. Such legal fiction may It only remains for us to consider petitioner's second
be disregarded only when an attempt is made to assignment of error referring to the lower courts'
use it as a cloak to hide an unlawful or fraudulent refusal to entertain his counterclaim for damages
purpose. No such thing has been alleged or proven against the respondent Borja arising from the
in this case. It has not been alleged nor even bringing of this action. The lower courts having
intimated that Vazquez personally benefited by the sustained plaintiff's action. The finding of the Court
contract of sale in question and that he is merely of Appeals that according to the preponderance of
invoking the legal fiction to avoid personal liability. the evidence the defendant Vazquez celebrated the
Neither is it contended that he entered into said contract not in his personal capacity but as acting
contract for the corporation in bad faith and with president and manager of the corporation, does not
intent to defraud the plaintiff. We find no legal and warrant his contention that the suit against him is
factual basis upon which to hold him liable on the malicious and tortious; and since we have to decide
contract either principally or subsidiarily. defendant's counterclaim upon the facts found by
The trial court found him guilty of negligence in the the Court of Appeals, we find no sufficient basis
performance of the contract and held him personally upon which to sustain said counterclaim. Indeed, we
liable on that account. On the other hand, the Court feel that a a matter of moral justice we ought to
of Appeals found that he "no solamente obro con state here that the indignant attitude adopted by
negligencia, sino interveniendo culpa de su parte, the defendant towards the plaintiff for having
por lo que de acuerdo con los arts. 1102, 1103 y brought this action against him is in our estimation
1902 del Codigo Civil, el debe ser responsable not wholly right. Altho from the legal point of view
subsidiariamente del pago de la cantidad objeto de he was not personally liable for the fulfillment of the
la demanda." We think both the trial court and the contract entered into by him on behalf of the
Court of Appeals erred in law in so holding. They corporation of which he was the acting president
have manifestly failed to distinguish a contractual and manager, we think it was his moral duty
from an extracontractual obligation, or an obligation towards the party with whom he contracted in said
arising from contract from an obligation arising from capacity to see to it that the corporation
represented by him fulfilled the contract by allowed to profit by his own wrong under the
delivering the palay it had sold, the price of which it protective cover of the corporate existence of the
had already received. Recreant to such duty as a company he represented. It cannot be pretended
moral person, he has no legitimate cause for that any advantage under the sale inured to the
indignation. We feel that under the circumstances benefit of Natividad-Vazquez Sabani Development
he not only has no cause of action against the Co., Inc. and not of the defendant personally, since
plaintiff for damages but is not even entitled to the latter undoubtedly owned a considerable part of
costs. its capital.
The judgment of the Court of Appeals is reversed,
and the complaint is hereby dismissed, without any
finding as to costs.
Yulo, C.J., Moran, Horrilleno and Bocobo, JJ., concur.

Separate Opinions
PARAS, J., dissenting:
Upon the facts of this case as expressly or impliedly
admitted in the majority opinion, the plaintiff is
entitled to a judgment against the defendant. The
latter, as acting president and manager of
Natividad-Vazquez Sabani Development Co., Inc.,
and with full knowledge of the then insolvent status
of his company, agreed to sell to the plaintiff 4,000
cavans of palay. Notwithstanding the receipt from
the plaintiff of the full purchase price, the defendant
delivered only 2,488 cavans and failed and refused
to deliver the remaining 1,512 cavans and failed
and refused to deliver the remaining 1,512 cavans
and a quantity of empty sacks, or their value. Such
failure resulted, according to the Court of First
Instance of Manila and the Court of Appeals, from
his fault or negligence.
It is true that the cause of action made out by the
complaint is technically based on a contract
between the plaintiff and Natividad-Vazquez Sabani
Development Co., Inc. which is not a party to this
case. Nevertheless, inasmuch as it was proven at
the trial that the defendant was guilty of fault in that
he prevented the performance of the plaintiff's
contract and also of negligence bordering on fraud
which cause damage to the plaintiff, the error of
procedure should not be a hindrance to the
rendition of a decision in accordance with the
evidence actually introduced by the parties,
especially when in such a situation we may order
the necessary amendment of the pleadings, or even
consider them correspondingly amended.
As already stated, the corporation of which the
defendant was acting president and manager was,
at the time he made the sale of the plaintiff, known
to him to be insolvent. As a matter of fact, said
corporation was soon thereafter dissolved. There is
admitted damage on the part of the plaintiff, proven
to have been inflicted by reason of the fault or
negligence of the defendant. In the interest of
simple justice and to avoid multiplicity of suits I am
therefore impelled to consider the present action as
one based on fault or negligence and to sentence
the defendant accordingly. Otherwise, he would be