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    CASE #103 Joselito Bustos vs. Millians Shoe, Inc., Sps. Fernando and Amelia Cruz G.R. No. 185024, April 4, 2017 Facts

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    Harlene
    This case involves a property owned by Spouses Cruz that was auctioned off due to unpaid taxes. The buyer, Joselito Bustos, was issued a new title but notices were later filed indicating the property was part of a rehabilitation case for Millians Shoe Inc. (MSI), where the Spouses were stockholders. Bustos claimed the property should be excluded as it belonged to the Spouses before the rehabilitation case. The court found that MSI was not conclusively shown to be a close corporation that would make the Spouses liable for its debts. As stockholders, the Spouses enjoyed limited liability and their property could not be considered part of MSI's assets under rehabilitation. The court ruled the property should

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    CASE #103 Joselito Bustos vs. Millians Shoe, Inc., Sps. Fernando and Amelia Cruz G.R. No. 185024, April 4, 2017 Facts

    Uploaded by

    Harlene
    52 views2 pages
    This case involves a property owned by Spouses Cruz that was auctioned off due to unpaid taxes. The buyer, Joselito Bustos, was issued a new title but notices were later filed indicating the property was part of a rehabilitation case for Millians Shoe Inc. (MSI), where the Spouses were stockholders. Bustos claimed the property should be excluded as it belonged to the Spouses before the rehabilitation case. The court found that MSI was not conclusively shown to be a close corporation that would make the Spouses liable for its debts. As stockholders, the Spouses enjoyed limited liability and their property could not be considered part of MSI's assets under rehabilitation. The court ruled the property should

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    103. 303 2017

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    This case involves a property owned by Spouses Cruz that was auctioned off due to unpaid taxes. The buyer, Joselito Bustos, was issued a new title but notices were later filed indicating the property was part of a rehabilitation case for Millians Shoe Inc. (MSI), where the Spouses were stockholders. Bustos claimed the property should be excluded as it belonged to the Spouses before the rehabilitation case. The court found that MSI was not conclusively shown to be a close corporation that would make the Spouses liable for its debts. As stockholders, the Spouses enjoyed limited liability and their property could not be considered part of MSI's assets under rehabilitation. The court ruled the property should

    Copyright:

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

    CASE #103 Joselito Bustos vs. Millians Shoe, Inc., Sps. Fernando and Amelia Cruz G.R. No. 185024, April 4, 2017 Facts

    Uploaded by

    Harlene
    This case involves a property owned by Spouses Cruz that was auctioned off due to unpaid taxes. The buyer, Joselito Bustos, was issued a new title but notices were later filed indicating the property was part of a rehabilitation case for Millians Shoe Inc. (MSI), where the Spouses were stockholders. Bustos claimed the property should be excluded as it belonged to the Spouses before the rehabilitation case. The court found that MSI was not conclusively shown to be a close corporation that would make the Spouses liable for its debts. As stockholders, the Spouses enjoyed limited liability and their property could not be considered part of MSI's assets under rehabilitation. The court ruled the property should

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    CASE #103

    JOSELITO BUSTOS vs. MILLIANS SHOE, INC., SPS. FERNANDO AND AMELIA CRUZ
    G.R. No. 185024, April 4, 2017

    FACTS:
    For nonpayment of real estate taxes, the City Treasurer of Marikina auctioned off the property
    of Spouses Fernando and Amelia Cruz, with petitioner Joselito Hernand M. Bustos emerging 'as the
    winning bidder on 14 October 2004. On 13 July 2006, the RTC-Marikina City rendered a final and
    executory decision ordering the cancellation of the previous title and the issuance of a new one under
    the name of petitioner.
    Meanwhile, notices of lis pendens were annotated on the said property on 9 February
    2005. These markings indicated that SEC Corp. Case No. 036-04, which was filed before the RTC
    and involved the rehabilitation proceedings for Millians Shoe, Inc. (MSI), covered the subject property
    and included it in the Stay Order issued by the RTC dated 25 October 2004. On 26 September 2006,
    petitioner moved for the exclusion of the subject property from the Stay Order. He claimed that the lot
    belonged to Spouses Cruz who were mere stockholders and officers of MSI. He further argued that
    since he had won the bidding of the property on 14 October 2004, or before the annotation of the title
    on 9 February 2005, the auctioned property could no longer be part of the Stay Order. Petitioner’s
    motion for exclusion was denied by RTC, and later by appellate court.

    ISSUE:
    Whether the properties of Spouses Cruz should be made answerable for the obligations of
    MSI, upon which the Spouses were stockholders.

    HELD:
    No. Section 97 of the Corporation Code only specifies that the stockholders of the corporation
    shall be subject to all liabilities of directors. Nowhere in that provision provides any inference that
    stockholders of a close corporation are automatically liable for corporate debts and obligations.

    1. In finding the subject property answerable for the obligations of MSI, the CA characterized
    respondent spouses as stockholders of a close corporation who, as such, are liable for its debts.
    This conclusion is baseless. To be considered a close corporation, an entity must abide by the
    requirements laid out in Section 96 of the Corporation Code. Narrow distribution of ownership
    does not, by itself, make a close corporation. Courts must look into the articles of incorporation to
    find provisions expressly stating that (1) the number of stockholders shall not exceed 20; or (2) a
    preemption of shares is restricted in favor of any stockholder or of the corporation; or (3) the listing
    of the corporate stocks in any stock exchange or making a public offering of those stocks is
    prohibited. Neither the CA nor the RTC showed its basis for finding that MSI is a close
    corporation.
    2. In rehabilitation proceedings, claims of creditors are limited to demands of whatever nature or
    character against a debtor or its property, whether for money or otherwise. Properties merely
    owned by stockholders cannot be included in the inventory of assets of a corporation under
    rehabilitation.
    3. By virtue of the general doctrine of separate juridical personality, stockholders of a corporation
    enjoy the principle of limited liability, the corporate debt is not the debt of the stockholder.  Thus,
    being an officer or a stockholder of a corporation does not make one's property the property also
    of the corporation.

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