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EDSA SHANGRI-LA HOTEL v. BF CORPORATION

FACTS:

The case involves two consolidated petitions for review seeking to nullify certain issuances of the Court of Appeals (CA). In the first petition, Edsa Shangri-la Hotel and Resort, Inc. (ESHRI), along with its officers, assails the decision of the CA affirming the decision of the Regional Trial Court ordering them to pay respondent BF Corporation (BF) a sum of money with interests and damages. In the second petition, petitioner Cynthia Roxas-del Castillo also assails the same CA decision that adjudged her jointly and severally liable with ESHRI to pay the monetary award decreed in the RTC decision. The dispute arose from a construction contract executed between ESHRI and BF for the construction of the EDSA Shangri-la Hotel. BF claimed that ESHRI did not remeasure the work done and did not pay for progress billings from nos. 14 to 19. After failed attempts to collect the unpaid billings, BF filed a suit for a sum of money and damages. The RTC ruled in favor of BF and ordered ESHRI to pay the outstanding amount, return the retention sum, and pay interest, moral and exemplary damages, attorney's fees, and costs of the suit. ESHRI appealed to the CA, but pending the resolution of the appeal, multiple incidents occurred, such as the garnishment of ESHRI's bank account and the issuance of a writ of preliminary injunction by the CA.

Petitioner BF Corporation (BF) entered into a construction contract with respondent Energy Systems Hydroelectric Resources, Inc. (ESHRI) for the construction of a hydroelectric power plant. Disputes arose between the parties, leading to BF filing a complaint for rescission and damages. The trial court ruled in favor of BF, ordering the rescission of the contract and awarding damages. ESHRI filed a motion for execution pending appeal, which the trial court granted. BF filed a petition for certiorari with the Court of Appeals (CA), challenging the trial court's grant of the motion for execution pending appeal. The CA issued a writ of preliminary mandatory injunction, ordering the trial court judge and/or his branch sheriff to lift the garnishments and levy made under the enjoined order of execution pending appeal. The CA later set aside the trial court's order and affirmed its decision with modifications. BF's petition for review before the Supreme Court was denied. ESHRI filed an application for restitution or damages against BF's bond, which the CA granted. BF and its surety filed separate motions for reconsideration. The CA rendered a decision denying ESHRI's application for restitution and damages against BF's bond. This decision is now being appealed before the Supreme Court.

In another case, ESHRI filed a separate petition before the Supreme Court, raising issues on the admission of evidence, delay in performance of obligations, and the award of damages and attorney's fees. The Supreme Court held that only questions of law may be presented in an appeal by certiorari and affirmed the factual findings of the trial court as affirmed by the CA.

This case involves the admissibility of photocopies of certain documents as evidence in a contractual dispute. Petitioner AS argues that the photocopies should have been excluded as secondary evidence, while respondent BF claims to have laid the necessary basis for their admission. Specifically, AS argues that BF failed to present the original documents or explain their non-production, thereby violating the best evidence rule. However, BF contends that it had indeed complied with the laying-the-basis requirement and justifies the admission of the photocopies by stating that it was unable to present the originals.

ISSUES:

  1. Whether the photocopies of Progress Billing Nos. 14 to 19, PMIs, and WVOs are admissible as secondary evidence.

  2. Whether the restitution of the garnished funds was proper.

  3. Whether Roxas-del Castillo can be held personally liable for the judgment award.

  4. Whether the doctrine on piercing the veil of the separate corporate identity applies in this case.

  5. Whether petitioner Roxas-del Castillo may be held personally liable as a corporate director.

  6. Whether Roxas-del Castillo may be held liable for breaches of contract committed by the corporation after she severed ties.

RULING:

  1. The photocopies of Progress Billing Nos. 14 to 19, PMIs, and WVOs are admissible as secondary evidence. The trial court correctly allowed the presentation of the photocopied documents as secondary evidence because BF had complied with the requirements. The stenographic notes show that BF requested opposing counsel to produce the originals, but ESHRI failed to do so. The circumstances of the case fall under the exception under Sec. 3(b) of Rule 130, which allows for the presentation of secondary evidence when the original document is in the custody or control of the adverse party and the latter fails to produce it after reasonable notice.

  2. The restitution of the garnished funds was proper since it was in accordance with the final and executory decision of the Supreme Court.

  3. Roxas-del Castillo cannot be held personally liable for the judgment award since she was only a former director of the corporation and cannot be held liable for the breach of a contract entered into by the corporation.

  4. The appellate court effectively recognized the applicability of the doctrine on piercing the veil of the separate corporate identity. However, the Supreme Court held that the doctrine does not apply in this case as there was no act of malice or dishonest purpose imputed to Roxas-del Castillo that would warrant the lifting of the corporate veil.

  5. For Roxas-del Castillo to be held personally liable as a corporate director, it must be shown that she acted in a manner and under the circumstances contemplated in Section 31 of the Corporation Code. However, there was no evidence presented that she engaged in misrepresentation or acted in bad faith. Thus, she cannot be held personally liable as a corporate director.

  6. Roxas-del Castillo cannot be held liable for breaches of contract committed by the corporation after she severed ties with the hotel management. Contracts take effect only between the parties, their assigns, and heirs. Since Roxas-del Castillo no longer had any participation in the corporation's affairs when the dispute occurred, she cannot be held liable for the corporation's actions.

PRINCIPLES:

  • The best evidence rule requires that the original of a writing must be produced as evidence, except where the original cannot be had. Secondary evidence of the contents of a written instrument may be presented when the original is lost, destroyed, or in the custody or control of the adverse party. (Rule 130, Section 3)

  • Before resorting to secondary evidence, the offeror must prove the existence and execution of the original document, the cause of its unavailability, and must act in good faith. (Sec. 3(b) of Rule 130)

  • If the original document is in the custody or control of the adverse party, the offeror must give reasonable notice to the adverse party and the latter must fail or refuse to produce the original in court. (Sec. 6 of Rule 130)

  • The mere fact that the original of the writing is in the custody or control of the party against whom it is offered does not warrant the admission of secondary evidence. The offeror must prove that he has done all in his power to secure the best evidence by giving notice to the said party to produce the document.

  • When a judgment is reversed or annulled, the trial court may issue orders of restitution or reparation of damages as equity and justice may warrant under the circumstances.

  • A decision rendered by a court must express clearly and distinctly the facts and the law on which it is based.

  • A corporation has a separate and distinct personality from its stockholders, and the doctrine on piercing the veil of the separate corporate identity applies only in exceptional circumstances such as fraud, perpetration of social injustice, or evasion of obligations.

  • Corporate officers may be held solidarily liable only under exceptional circumstances, such as when they act with malice or in bad faith.

  • Liability of corporate directors under Section 31 of the Corporation Code requires proof of willful or knowing participation in patently unlawful acts or pecuniary interest in conflict with their duty.

  • Contracts are binding only among parties to the agreement, and liability does not extend to those who have severed ties with the contracting party.