NAMARCO vs.

Associated Finance Company

19 SCRA 962, G.R. No. L-20886
April 27, 1967

FACTS: In 1958, National Marketing Corporation (NAMARCO) entered into an agreement with
Associated Finance Company, Inc. (AFCI). NAMARCO was represented by its General
Manager Benjamin Estrella. AFCI was represented by its President Francisco Sycip. The
agreement was that NAMARCO will deliver raw sugar to AFCI. In exchange, AFCI will deliver
refined sugar to NAMARCO. NAMARCO delivered the raw sugar but AFCI failed to comply with
its obligation. NAMARCO then demanded AFCI to comply or if not pay the amount of the raw
sugar delivered which was at P403,514.28. AFCI was not able to do either. Hence, NAMARCO
sued AFCI and Sycip was impleaded.

ISSUE: Whether or not Sycip should be held jointly and severally liable with Associated
Finance Company, Inc.

HELD: Yes. In this case, it is proper to pierce the veil of corporate fiction. It was proven that
during the time of the agreement, AFCI was already insolvent. Such fact was already known to
Sycip. He knew that AFCI was not in a position to transact with NAMARCO because it could not
possibly comply with its obligations. Sycip’s assurances that AFCI can deliver said refined sugar
products is obviously fashioned to defraud NAMARCO into delivering the raw sugar to AFCI.
Consequently, Sycip cannot now seek refuge behind the general principle that a corporation has
a personality distinct and separate from that of its stockholders and that the latter are not
personally liable for the corporate obligations. He is therefore liable jointly and severally with
AFCI to pay the amount claimed for the raw sugar delivered plus other damages claimed by
NAMARCO with interest.

PRINCIPLE: Piercing the Veil of Corporate Fiction

A stockholder is guilty of fraud where, through false representation, he succeeded in inducing
another corporation to enter into an exchange agreement with the corporation he represented
and over whose business he had absolute control and where it further appears that said
stockholder had full knowledge of the fact that his corporation was in no position to comply with
the obligation which he had caused it to assume.

Said stockholder cannot seek refuge behind the general principle that a corporation has a
personality distinct and separate from that of its stockholders and that the latter are not
personally liable for the corporate obligations. The court is justified in piercing the veil of
corporate fiction and in holding said stockholder solidarily liable with the corporation for the
sums of money adjudged in favor of the aggrieved corporation. When the corporation is the
mere alter ego of a person, the corporate fiction may be disregarded; the same being true when
the corporation is controlled, and its affairs are so conducted as to make it merely an
instrumentality, agency or conduit of another.