Xhavier Brett King D.

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Donina C. Halley vs. Printwell, Inc., [GR No. 157549] [May 30, 2011]
Legal Doctrine:
(1) The RTC was not correct in holding that the petitioner as a stockholder of the corporation is personally liable
only based on the proportion to their shares in the capital stock of the BMPI which is P149, 955.00 since under
the Limited Liability Rule, a stockholder is personally liable for the financial obligations of the corporation to
the extent of his unpaid subscription which is P262, 000.00. (Doctrine of Limited Liability)
(2) The petitioner, Halley, as a stockholder of the BMPI should be personally liable to the obligation to pay of the
corporation, BMPI to Printwell since under the Doctrine of Piercing the Veil of Corporate Fiction, the
corporate personality may be disregarded, and the individuals composing the corporation will be treated as
individuals, if the corporate entity is being used as a cloak or cover for fraud or illegality; as a justification for a
wrong; as an alter ego, an adjunct, or a business conduit for the sole benefit of the stockholders. (Doctrine of
Piercing the Veil of Corporate Fiction)
(3) The RTC and CA did not err in applying the Trust Fund Doctrine even though she had already fully paid her
subscriptions to the capital stock of BMPI if check was made as a payment and since Trust Fund Doctrine is
not limited to reaching the stockholder’s unpaid subscription but all assets and property belonging to the
corporation held in trust for the benefit of creditors that were distributed or in the possession of the
stockholders, regardless of full payment of their subscriptions, may be reached by the creditor in satisfaction of
its claim. (Trust Fund Doctrine)
Facts: The petitioner, Donina Halley, was an incorporator and original director of Business Media Philippines, Inc.
(BMPI). The other party is Printwell, Inc. (Printwell) who was engaged in commercial and industrial printing. BMPI
commissioned Printwell for the printing of the magazine Philippines, Inc., together with wrappers and subscription
cards that BMPI published and sold. For that purpose, Printwell extended 30–day credit accommodations to BMPI. In
the period from October 1988 to July 1989, BMPI placed with Printwell several orders on credit. BMPI paid only P25,
000.00, Printwell sued BMPI in January 1990 for the collection of the unpaid balance of P291, 342.76 in the Regional
Trial Court (RTC) and in February 1990, Printwell amended the complaint in order to implead as defendants all the
original stockholders and incorporators to recover on their unpaid subscriptions.
The RTC decided in favor of Printwell disregarding the Doctrine of Separate Personality invoked by Halley
and applying the Trust Fund Doctrine. The petitioner appealed to the Court of Appeals (CA) but it was to no avail
thereby prompting them to come to the solace of the Supreme Court asking to reverse the decision of the CA averring
(1) that the RTC was correct in holding that the petitioner as a stockholder of the corporation is personally liable only
based on the proportion to their shares in the capital stock of the BMPI which is P149, 955.00; (2) that the petitioner,
Halley, as a stockholder of the BMPI should not be personally liable to the obligation to pay of the corporation, BMPI
to Printwell; and (3) the RTC and CA erred in applying the Trust Fund Doctrine on the ground that she had already fully
paid her subscriptions to the capital stock of BMPI.
Issue:
1. Whether RTC was correct in holding that the petitioner as a stockholder of the corporation is personally liable
only based on the proportion to their shares in the capital stock of the BMPI which is P149, 955.00.
2. Whether the petitioner, Halley, as a stockholder of the BMPI should not be personally liable to the obligation
to pay of the corporation, BMPI to Printwell.
3. Whether the RTC and CA erred in applying the Trust Fund Doctrine on the ground that she had already fully
paid her subscriptions to the capital stock of BMPI.
Ruling of the Court:

1. No, the RTC was not correct in holding that the petitioner as a stockholder of the corporation is personally
liable only based on the proportion to their shares in the capital stock of the BMPI which is P149, 955.00.
Under the Limited Liability Rule, a stockholder is personally liable for the financial obligations of the
corporation to the extent of his unpaid subscription. While stockholders are generally not liable, the
stockholders may be liable if they have not or have fully paid the subscription. In the case at bar, the
petitioner’s unpaid subscription is P262, 000.00 but the RTC declared that the petitioner is personally liable
only in the amount based on the proportion to their shares in the capital stock of BMPI which is P149, 955.00.
Therefore, the RTC was not correct in holding that the petitioner as a stockholder of the corporation is
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personally liable only based on the proportion to their shares in the capital stock of the BMPI which is P149,
955.00 since under the Limited Liability Rule, a stockholder is personally liable for the financial obligations of
the corporation to the extent of his unpaid subscription which is P262, 000.00.

2. No, the petitioner, Halley, as a stockholder of the BMPI should be personally liable to the obligation to pay of
the corporation, BMPI to Printwell. Under the Doctrine of Separate personality, a corporation has a personality
separate and distinct from those of its stockholders, directors, or officers, such separate and distinct personality
is merely a fiction created by law for the sake of convenience and to promote the ends of justice. However,
under the Doctrine of Piercing the Veil of Corporate Fiction, the corporate personality may be disregarded,
and the individuals composing the corporation will be treated as individuals, if the corporate entity is being
used as a cloak or cover for fraud or illegality; as a justification for a wrong; as an alter ego, an adjunct, or a
business conduit for the sole benefit of the stockholders. In this case, BMPI made several orders on credit
from appellee PRINTWELL involving the printing of business magazines, wrappers and subscription cards, in
the total amount of P291, 342.76 which facts were never denied by appellant’s stockholders that they owe(d)
appellee the amount of P291,342.76. In view of the unpaid subscriptions, BMPI failed to pay appellee of its
liability; hence appellee in order to protect its right can collect from the appellant’s stockholders regarding their
unpaid subscriptions. To deny appellee from recovering from appellants would place appellee in a limbo on
where to assert their right to collect from BMPI since the stockholders who are appellants herein are availing
the defense of corporate fiction to evade payment of its obligations. Thus, the petitioner, Halley, as a
stockholder of the BMPI should be personally liable to the obligation to pay of the corporation, BMPI to
Printwell since under the Doctrine of Piercing the Veil of Corporate Fiction, the corporate personality may be
disregarded, and the individuals composing the corporation will be treated as individuals, if the corporate entity
is being used as a cloak or cover for fraud or illegality; as a justification for a wrong; as an alter ego, an adjunct,
or a business conduit for the sole benefit of the stockholders.

3. No, the RTC and CA did not err in applying the Trust Fund Doctrine even though she had already fully paid
her subscriptions to the capital stock of BMPI. The Supreme Court clarified that the Trust Fund Doctrine is
not limited to reaching the stockholders unpaid subscriptions. The scope of the doctrine when the corporation
is insolvent encompasses not only the capital stock, but also other property and assets generally regarded in
equity as a trust fund for the payment of corporate debts. All assets and property belonging to the corporation
held in trust for the benefit of creditors that were distributed or in the possession of the stockholders,
regardless of full payment of their subscriptions, may be reached by the creditor in satisfaction of its claim.
Further, Payment is defined as the delivery of money. Here, the means of payment made by the petitioner was
by means of check and because a check is not money and only substitutes for money, the delivery of a check
does not operate as payment and does not discharge the obligation under a judgment. Therefore, the RTC and
CA did not err in applying the Trust Fund Doctrine even though she had already fully paid her subscriptions to
the capital stock of BMPI if check was made as a payment and since Trust Fund Doctrine is not limited to
reaching the stockholder’s unpaid subscription but all assets and property belonging to the corporation held in
trust for the benefit of creditors that were distributed or in the possession of the stockholders, regardless of full
payment of their subscriptions, may be reached by the creditor in satisfaction of its claim.