GOCHAN vs. YOUNG

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 VIRGINIA O. GOCHAN, FELIX Y. GOCHAN III, MAEGOCHANEFANN, LOUISE Y. GOCHAN, ESTEBAN Y.GOCHAN, JR., DOMINIC Y. GOCHAN, FELIX O. GOCHAN III,MERCEDES R. GOCHAN, ALFREDO R. GOCHAN, ANGELINAR. GOCHAN-HERNAEZ, MARIA MERCED R. GOCHAN,CRISPO R. GOCHAN, JR., MARION R. GOCHAN, MACTANREALTY DEVELOPMENT CORPORATION and FELIXGOCHAN & SONS REALTY CORPORATION, petitioners, vs.  RICHARD G. YOUNG, DAVID G. YOUNG, JANE G. YOUNG-LLABAN, JOHN D. YOUNG, JR., MARY G. YOUNG-HSU andALEXANDER THOMAS G. YOUNG as heirs of Alice Gochan; theINTESTATE ESTATE OF JOHN D. YOUNG, SR.; and CECILIA GOCHAN-UY and MIGUEL C. UY, for themselves and on behalf and for the benefit of FELIX GOCHAN & SONS REALTYCORPORATION, respondents.

G.R. No. 131889. March 12, 2001. PANGANIBAN, J.

Topic: Piercing the veil of corporate fiction

Principles/Doctrines: The notion of corporate entity will be pierced or disregarded and the individuals composing it will be treated as identical if the corporate entity is being used as a cloak or cover for fraud or illegality; as a justification for a wrong; or as an alter ego, an adjunct, or a business conduit for the sole benefit of the stockholders.

Nature of the Case: Petition for Review on Certiorari under Rule 45 of the Rules of Court. The Petition assails the Decision of the Court of Appeals (CA) denying petitioner’s Motion for Reconsideration.

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FACTS: Felix Gochan and Sons Realty Corporation (Gochan Realty) was registered with the SEC with Felix Gochan, Sr., Maria Pan Nuy Go Tiong, Pedro Gochan, Tomasa Gochan, Esteban Gochan and Crispo Gochan as incorporators. Felix Gochan Sr.’s daughter, Alice, mother of respondents, inherited 50 shares of stock in Gochan Realty from the former. She died in 1955, leaving the 50 shares to her husband, John Young, Sr. In 1962, the Regional Trial Court of Cebu adjudicated 6/14 of these shares to her children, Richard Young, David Young, Jane Young Llaban, John Young Jr., Mary Young Hsu and Alexander Thomas Young. Having earned dividends, these stocks numbered 179 by 20 September 1979.

 

Five days later (25 September), at which time all the children had reached the age of majority, their father John, Sr., requested Gochan Realty to partition the shares of his late wife by canceling the stock certificates in his name and issuing in lieu thereof, new stock certificates in the names of[herein respondents]. Respondent Gochan Realty refused, citing as reason, the right of first refusal granted to the remaining stockholders by the Articles of Incorporation. John, Sr. died, leaving the shares to the[respondents]. Cecilia Gochan Uy and Miguel Uy filed a complaint with the SEC for issuance of shares of stock to the rightful owners, nullification of shares of stock, reconveyance of property impressed with trust, accounting, removal of officers and directors and damages against respondents. A Notice of Lis Pendens was annotated as[sic] real properties of the corporation.

SEC, through its Hearing Officer, granted the motion to dismiss and ordered the cancellation of the notice of lis pendens annotated upon the titles of the corporate lands.

 

[petitioners] filed a Motion for cancellation ofNotice of Lis Pendens. [Respondents] opposed the said motion. SEC, through its Hearing Officer, granted the motion to dismiss and ordered the cancellation of the notice of lis pendens annotated upon the titles of the corporate lands. Court of Appeals reversed the SEC Order for the cancellation of the notice of lis pendens..

 

ISSUE: Whether or not the cancellation of [the] notice of lis pendens was justified considering that the suit did not involve real properties owned by Gochan Realty.”

 

HELD: Yes. In several causes of action of the Complaint, there are allegations of breach of trust and confidence and usurpation of business opportunities in conflict with petitioners’ fiduciary duties to the corporation, resulting in damage to the Corporation. Under these causes of action, respondents are asking for the delivery to the Corporation of possession of the parcels of land and their corresponding certificates of title. Hence, the suit necessarily affects the title to or right of possession of the real property sought to be reconveyed. The Rules of Court allows the annotation of a notice of lis pendens in actions affecting the title or right of possession of real property.

 

The fact that respondents are not stockholders of the Mactan Realty Development Corporation and the Lapu-Lapu Real Estate Corporation does not make them non-parties to this case. To repeat, the jurisdiction of a court or tribunal over the subject matter is determined by the allegations in the Complaint. In this case, it is alleged that the aforementioned corporations are mere alter egos of the directors-petitioners,and that the former acquired the properties sought to be reconveyed to FGSRC in violation of the directors-petitioners’ fiduciary duty to FGSRC.The notion of corporate entity will be pierced or disregarded and the individuals composing it will be treated as identical if, as alleged in the present case, the corporate entity is being used as a cloak or cover for fraud or illegality; as a justification for a wrong; or as an alter ego, an adjunct, or a business conduit for the sole benefit of the stockholders.

 

Petition denied. Decision of the CA is affirmed.

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