STRONGHOLD INSURANCE COMPANY v CUENCA

March 6, 2013 | Bersamin, J. | Piercing the Corporate Veil

PETITIONER: Stronghold Insurance Company, Inc. (SICI)

RESPONDENT: Tomas Cuenca, Marcelina Cuenca, Milagros Cuenca, Bramie Tayactac and Manuel Maraon, Jr.

SUMMARY: In a case for a collection of sum of money by Maraon against the Cuencas and Tayactac, the sheriff levied on
attachment the properties of Arc Cuisine, Inc., where the respondents were stockholders. When the properties went missing, the
respondents filed a motion praying for the delivery of the properties back to them and the payment of damages worth the value of the
attached properties. The SC said that because the properties belong to Arc Cuisine, Inc. as a corporation, the respondents as
stockholders lacked the legal personality to claim damages sustained from the levy.

DOCTRINE: Corporations have a personality distinct and separate from its stockholders. Even when the foreclosure on the assets
of the corporation was wrongful and done in bad faith, the stockholders had no standing to recover for themselves moral damages;
otherwise, they would be appropriating and distributing part of the corporations assets prior to the dissolution of the corporation and
the liquidation of its debts and liabilities.

FACTS:
1. [Jan. 19, 1998] Maraon filed a complaint for the
collection of sum of money against the Cuencas and
Tayactac. In order for a writ of preliminary attachement to
be issued, the former posted a bond worth 1M issued by
Stronghold.
2. [Feb. 17, 1998] Enforcing the writ, the sheriff levied upon
the equipment, supplies, materials, and various personal
property belonging to Arc Cuisine, Inc. that were found in
the leased corporate office-cum-commissary or kitchen of
the corporation.
3. [Feb. 17, 2000] The sheriff reported to RTC that the
properties in the safekeeping of Maraon, were not in the
warehouse and were seen at Contis Pastry and Bake Shop
(owned by Maraon).
4. Respondents Cuencas filed a Motion to Require Sheriff to
Deliver Attached Properties, praying that:
- Sheriff deliver the attached properties to them
- SICI be directed to pay the amount of the surety bond
- Maraon be held personaly liable for the balance
- 1.7M damages, as value of the attached properties
because the respondents, being accountable for the
properties, would be turning over that amount over to
Arc Cuisine, Inc.
- Moral damages, exemplary damages, and AF
5. Maraon filed his own opposition arguing that, because the
attached properties belonged to Arc, and that he and his
relatives owned 50% of the stocks thereof, it should follow
that 50% of the value fo the missing properties constituted
liquidated dividends that should remain with and belong to
him. He prayed that he be required to return only 100k
6. RTC held Maraon and SICI jointly and solidarily liable.
SICI was made to pay the 1M representing the bond. CA
affirmed.
7. SICI argued that the resspondents were not the owners of
the properties attached and are thus not the proper parties
to claim any damages arising therefrom
RATIO:
1. The properties subject to the levy on attachement belonged
to Arc Cuisine, Inc. alone, and not to the Cuencas and
Tayactac in their own right.
2. Respondents were only stockholders of Arc, which had a
personality distinct and separate from that of any or all of
them. They were not vested with any direct interest in the
properties. Their stockholdings represented only their
proportionate or aliquot interest in the properties of the
corporation.
3. The damages occasioned by the levy prejudiced Arc, not
them. As such, only Arc had the right to claim and recover
damages. However, Arc was not even joined in the action
either as an original party or as an intervenor.
4. Thus, respondent lacked the legal personality to claim the
damages sustained from the levy of the formers properties.
5. Asset Privatization Trust v CA: Even when the foreclosure
on the assets of the corporation was wrongful and done in
bad faith, the stockholders had no standing to recover for
themselves moral damages; otherwise, they would be
appropriating and distributing part of the corporations
assets prior to the dissolution of the corporation and the
liquidation of its debts and liabilities.
6. Evangelista v Santos: if the injury complained of is
primarily to the corporation, the suit for the damages
claimed should be by the corporation rather than by the
stockholders
7. The respondents still had right of action even if the affected
properties were then under their custody at the time of the
attachment, considering that their custody was only
incidental to the operation of the corporation.
RULING:
CA decision reversed and set aside.

ISSUE:
WON the properties of Arc may be levied upon NO