Gold Line Tours, Inc. vs. Heirs of Maria Concepcion Lacsa

The veil of corporate existence may be pierced and the separate juridical personality of a corporation disregarded when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime — including the evasion of a final and executory judgment. A petition for certiorari will not lie to correct mere errors of judgment or the appreciation of evidence; the petitioner must demonstrate grave abuse of discretion amounting to lack or excess of jurisdiction.

Travel & Tours Advisers, Inc. operated a bus line known as "Goldline" in Sorsogon, managed by William Cheng. Gold Line Tours, Inc. was a separately incorporated entity whose Articles of Incorporation were amended on November 8, 1993, shortly after the filing of Civil Case No. 93-5917 against Travel & Tours Advisers, Inc. The incorporators of Gold Line Tours, Inc. included William Cheng and members of the Ching and Dy families. The dispute arose from a breach of contract of carriage case that resulted in a final judgment against Travel & Tours Advisers, Inc., which sought to be executed against property registered under Gold Line Tours, Inc.

On August 2, 1993, Ma. Concepcion Lacsa and her sister Miriam Lacsa boarded a Goldline passenger bus owned and operated by Travel & Tours Advisers, Inc., en route from Sorsogon to Cubao, Quezon City. Concepcion had just obtained her Bachelor of Science in Nursing degree and was proceeding to Manila to take the nursing licensure board examination. Upon reaching the highway at Barangay San Agustin in Pili, Camarines Sur, the bus, driven by Rene Abania, collided with a passenger jeepney coming from the opposite direction, driven by Alejandro Belbis. As a result, a metal part of the jeepney detached and struck Concepcion in the chest, causing her instant death.

On August 23, 1993, Concepcion's heirs, represented by Teodoro Lacsa, filed a suit in the RTC against Travel & Tours Advisers, Inc. and Abania to recover damages for breach of contract of carriage, docketed as Civil Case No. 93-5917. Miriam testified that Abania had been occasionally looking up at a video monitor installed in the front portion of the bus despite driving at a fast speed, and that the collision occurred while the bus was overtaking another vehicle. The defendants presented SPO1 Pedro Corporal, who opined that the jeepney driver had been at fault, and William Cheng, the operator of the Goldline bus, who attested to exercising diligence in the selection and supervision of employees and blamed the death on the recklessness of the jeepney driver and its operator, Salvador Romano, against whom a third-party complaint was filed.

After trial, the RTC rendered its decision on June 30, 1997, finding Travel & Tours Advisers, Inc. liable for breach of contract of carriage and ordering it to pay the heirs ₱30,000 for wake expenses, ₱6,000 for funeral expenses, ₱50,000 for the death of Concepcion, ₱150,000 for moral damages, ₱20,000 for exemplary damages, ₱8,000 for attorney's fees, and ₱2,000 for litigation expenses, plus costs. The case against Abania and the third-party complaint were dismissed. The defendants appealed to the CA, but the appeal was dismissed on June 11, 1998 for failure to pay docket fees, and the dismissal became final with entry of judgment on July 17, 1998.

Thereafter, the heirs moved for a writ of execution, which the RTC granted on January 31, 2000, and issued on February 24, 2000. On May 10, 2000, the sheriff levied a tourist bus bearing Plate No. NWW-883 after Cheng failed to settle the judgment amount. On April 20, 2001, Gold Line Tours, Inc. submitted a verified third-party claim, asserting ownership over the levied bus and claiming it was a corporation entirely different from Travel & Tours Advisers, Inc., which had not been impleaded in the case. Notably, Gold Line Tours, Inc.'s Articles of Incorporation had been amended on November 8, 1993, shortly after the filing of the suit against Travel & Tours Advisers, Inc. The RTC dismissed the third-party claim on August 2, 2001, finding that William Cheng, who claimed to be the operator of Travel & Tours Advisers, Inc., was also the President/Manager and incorporator of Gold Line Tours, Inc., and that Travel & Tours Advisers, Inc. had been known in Sorsogon as Goldline. The RTC denied reconsideration on October 22, 2001.

• Grave Abuse of Discretion: Petitioner asserted that the CA erred in holding that the RTC did not act without jurisdiction or commit grave abuse of discretion in finding petitioner and Travel & Tours Advisers, Inc. to be one and the same entity.
• Insufficiency of Evidence: Petitioner insisted that the evidence to establish its identity with Travel & Tours Advisers, Inc. was insufficient to justify piercing the corporate veil.
• Separate Corporate Personality: Petitioner maintained that it was a corporation entirely different from Travel & Tours Advisers, Inc., that it had not been made a party to Civil Case No. 93-5917, and that the levied bus belonged to it and should be returned.

• Procedural Defect: Respondents argued that the third-party claim did not comply with the required notice of hearing under Rule 15, Sections 4 and 5 of the Rules of Court.
• Corporate Identity: Respondents countered that Travel & Tours Advisers, Inc. and petitioner were identical entities, both operated and managed by the same person, William Cheng.
• Fraud: Respondents argued that petitioner was attempting to defraud its creditors, making the doctrine of piercing the veil of corporate entity squarely applicable.

• Piercing the Corporate Veil: Whether the CA correctly found that the RTC did not gravely abuse its discretion in denying petitioner's verified third-party claim and treating Gold Line Tours, Inc. and Travel & Tours Advisers, Inc. as one and the same entity for purposes of execution.
• Scope of Certiorari: Whether the evidence was insufficient to establish corporate identity and whether certiorari was the proper remedy to challenge the RTC's appreciation of evidence.

• Piercing the Corporate Veil: Yes. The CA correctly upheld the RTC's finding that the two corporations were one and the same entity, supported by sufficient evidence that William Cheng was the operator and President/Manager/incorporator of both, and that Travel & Tours Advisers, Inc. was known as Goldline in Sorsogon.
• Scope of Certiorari: No. A petition for certiorari does not extend to errors of judgment or the appreciation of evidence; petitioner failed to demonstrate grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the RTC.

• Piercing the Corporate Veil: The RTC had sufficient factual basis to find that petitioner and Travel & Tours Advisers, Inc. were one and the same entity. Documents submitted by petitioner itself showed that William Cheng, who claimed to be the operator of Travel & Tours Advisers, Inc., was also the President/Manager and an incorporator of Gold Line Tours, Inc., joined by co-incorporators bearing the surnames "Ching" and "Dy." Travel & Tours Advisers, Inc. had been known in Sorsogon as Goldline. The CA cogently observed that there was no reason the defendant company would be using Goldline buses in its operations unless the two companies were actually one and the same. Moreover, the name "Goldline" was added to the defendant's name in the complaint without objection from Cheng, who could have raised the defense that Gold Line Tours, Inc. was in no way liable or involved. The RTC correctly applied the doctrine that the fiction of separate corporate personality should not be used to defeat public convenience, justify wrong, protect fraud, or defend crime — here, to avoid execution of a final judgment. The Court relied on Palacio vs. Fely Transportation Co., where the formation of a corporation to evade subsidiary liability for damages was held insufficient to shield the corporation from being treated as identical to its members.

• Scope of Certiorari: Petitioner bore the burden of demonstrating not merely reversible error but grave abuse of discretion amounting to lack or excess of jurisdiction. Grave abuse of discretion is defined as a capricious and whimsical exercise of judgment so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law. A petition for certiorari neither deals with errors of judgment nor extends to a mistake in the appreciation of the parties' evidence or the evaluation of their relative weight. Petitioner failed to discharge this burden, as the records showed the RTC correctly rejected the third-party claim. The rejection did not fall within the domain of certiorari's limiting requirement of excess or lack of jurisdiction.

• Piercing the Veil of Corporate Entity — The veil of corporate existence is a fiction of law that should not defeat the ends of justice. The notion of legal entity should not be used to defeat public convenience, justify wrong, protect fraud, or defend crime. Where the main purpose in forming a corporation is to evade liability for damages, the corporation may not be heard to say that it has a personality separate and distinct from its members. In this case, the Court found that Gold Line Tours, Inc. and Travel & Tours Advisers, Inc. were one and the same entity, both controlled by William Cheng, and that the separate corporate personality was being used as a shield to avoid execution of a final judgment — an end subversive of justice.

• Grave Abuse of Discretion in Certiorari — Grave abuse of discretion is a capricious and whimsical exercise of judgment so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, as where the power is exercised in an arbitrary and despotic manner because of passion or hostility. Mere abuse of discretion is not enough; it must be grave. A petition for certiorari does not deal with errors of judgment or the appreciation and weighing of evidence; the petitioner must demonstrate grave abuse of discretion amounting to lack or excess of jurisdiction.

• "The veil of corporate existence of a corporation is a fiction of law that should not defeat the ends of justice." — The opening line of the decision, articulating the controlling principle that the separate juridical personality of a corporation is not absolute and must yield when invoked to subvert justice.

• "This is what the third party claimant wants to do including the defendant in this case, to use the separate and distinct personality of the two corporation as a shield to further an end subversive of justice by avoiding the execution of a final judgment of the court." — The RTC's rationale, quoted and adopted by the Supreme Court, explaining why the corporate veil was pierced: the separate personalities were being used to evade a final and executory judgment.

• "a petition for the writ of certiorari neither deals with errors of judgment nor extends to a mistake in the appreciation of the contending parties' evidence or in the evaluation of their relative weight." — Defines the scope and limitation of certiorari as a remedy, distinguishing it from appeal and establishing the standard petitioner failed to meet.

• Palacio vs. Fely Transportation Co., L-15121, May 31, 1962, 5 SCRA 1011 — Controlling precedent cited by the RTC and affirmed by the Supreme Court. Held that where the main purpose in forming a corporation was to evade subsidiary liability for damages, the corporation may not claim a personality separate and distinct from its members, as this would sanction the use of the corporate fiction as a shield to further an end subversive of justice.

• Romy's Freight Service vs. Castro, G.R. No. 141637, June 8, 2006, 490 SCRA 160 — Cited for the proposition that certiorari does not deal with errors of judgment or the appreciation and weighing of evidence.

• Tan vs. Antazo, G.R. No. 187208, February 23, 2011, 644 SCRA 337 — Cited for the definition of grave abuse of discretion and the burden on the petitioner in certiorari proceedings.

• De Vera vs. De Vera, G.R. No. 172832, April 7, 2009, 584 SCRA 506 — Cited for the principle that certiorari does not lie where the lower court's ruling does not involve grave abuse of discretion amounting to lack or excess of jurisdiction.

• Article 1786, Civil Code — Creates a disputable presumption that a common carrier is at fault or negligent in the performance of its obligations toward a passenger when the passenger's death or injury occurs. The RTC applied this provision against Travel & Tours Advisers, Inc., which failed to disprove the presumption of negligence.

• Rule 41, Section 4, Rules of Court (1997) — Requires payment of docket and other lawful fees within the prescribed period for perfecting an appeal. The CA dismissed the defendants' appeal under this provision for failure to pay the required fees.

• Rule 15, Sections 4 and 5, Rules of Court — Governs the notice of hearing requirement for motions. Respondents invoked this provision to oppose petitioner's third-party claim as procedurally defective.

Teresita J. Leonardo-De Castro (Acting Chairperson, First Division), Mariano C. Del Castillo, Martin S. Villarama, Jr., and Estela Perlas-Bernabe concurred. No separate concurring opinions were noted.