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UP Law F2021 29 Caram vs.

CA
Corporation Law Corporate Entity 1987 Cruz

SUMMARY
Alberto Arellano sued Barretto and Garcia (promoters), petitioners Fermin, Jr. and Rosa Caram (investors), and Filipinas
Orient Airways to claim compensation for services rendered prior to the incorporation of Filipinas Orient Airways. Lower
court adjudged the defendants jointly and severally liable to pay the respondent. Petitioners appealed. SC ruled that
petitioners cannot be held personally liable, jointly or joint and severally, for the compensation claimed by respondent, as
they were merely among the financiers of the incorporation. Moreover, as a bona fide corporation, the Filipinas Orient
Airways should alone be liable for its corporate acts as duly authorized by its officers and directors.

FACTS
 Barretto and Garcia requested respondent Alberto Arellano to prepare a project study and render technical services
in relation to the incorporation of Filipinas Orient Airways. Said project study was later presented to petitioners
Caram, who were convinced to invest in the proposed airlines.
 On the basis of the project study, Filipinas Orient Airways was organized and rendered operational. Garcia, Barretto
and petitioners Caram became members of the Board and/or officers of the corporation.
 Subsequently, Arellano filed an action to compel Barretto and Garcia, petitioners Fermin Jr. and Rosa Caram, and
Filipinas Orient Airways to pay for his services.
 TRIAL COURT: Ordered the defendants to jointly and severally pay the Arellano P50k for his pre-organizational
services, plus P10k attorney’s fees.
 Petitioners’ co-defendants did not appeal from the trial court’s decision. Before the SC, petitioners claim that the
trial court’s order has no support in fact and law because they had no contract whatsoever with the private
respondent regarding the above-mentioned services. As mere subsequent investors in the corporation that was later
created, they should not be held solidarily liable with Filipinas Orient Airways, a separate juridical entity, and with
Barretto and Garcia, who were the ones who requested the said services of respondent.

RATIO
W/N Fermin Jr and Rosa Caram, as investors, should be held personally liable for the services rendered by the
plaintiff prior to the incorporation of Filipinas Orient Airways
NO. SC held that the petitioners cannot be held personally liable, jointly or jointly and severally, for the compensation
claimed by the private respondent for the services performed by him in the organization of the corporation.

The petitioners were not involved in the initial stages of the organization of the airline, which were being directed by
Barretto as the main promoter. Petitioners were merely among the financiers whose interest was to be invited and who were
in fact persuaded, on the strength of the project study, to invest in the proposed airline. The most that can be said is that they
benefited from such services, but there is no justification to hold them personally liable therefor. Otherwise, all the other
stockholders of the corporation, including those who came in later, and regardless of the amount of their shareholdings,
would be equally and personally liable also with the petitioners for the claims of the respondent.

There was also no showing that the Filipinas Orient Airways was a fictitious corporation and did not have a separate juridical
personality, to justify making the petitioners, as principal stockholders thereof, responsible for its obligations. As bona fide
corporation, the Filipinas Orient Airways should alone be liable for its corporate acts as duly authorized by its officers and
directors.

FALLO
WHEREFORE, the petition is granted. The petitioners are declared not liable under the challenged decision, which is
hereby modified accordingly. It is ordered.