G.R. No. 125986 Case Digest

G.R. No. 125986, January 28, 1999

Luxuria Homes Inc., and Aida Posadas

vs Hon. Court of Appeals, James Builder Construction and Jaime Bravo

Ponente: Martinez

Facts:

Aida and her 2 minor children co-owned a 1.6 hectare property in Sucat, Muntinlupa which was occupied by squatters. Aida then contracted Bravo regarding the development of the property and to negotiate with the squatters. 7 months later, Aida and her children assigned the property to Luxuria Homes, Bravo was a witness to the execution of the deed of assignment and the articles of incorporation of Luxuria.

Then in 1992, the relationship between Aida and Bravo turned sour, which resulted to Bravo demanding payment for services rendered in connection with the development of the land. Aida, refuses to pay. Thus, James Builder and Bravo initiated a complaint against Aida and Luxuria Homes.

The trial court declared Aida in default and ordered Aida, jointly and in solidum with Luxuria to pay Bravo. Aggrieved, Aida appealed to the CA. The CA then modified the decision of the trial court and deleted the award of moral damages on the ground that James Builder is a corporation and hence could not experience physical suffering and mental anguish.

Issue: Can petitioner Luxuria Homes be held liable to private respondents for the transactions supposedly entered into between Aida and Bravo?

Ruling:

We hold that the CA committed a reversible error in making Luxuria Homes liable. It cannot be said that the incorporation of Luxuria Homes and eventual transfer of the subject property to it were in fraud of private respondent as such were done with full knowledge of Bravo himself.

To disregard the separate juridical personality of a corporation, the wrong doing must be clearly and convincingly established. It cannot be presumed.