GREGORIO PALACIO vs. FELY TRANSPORTATION COMPANY  Palacio’s argument: Fely Corp.
should be made subsidiarily liable for
The Corporate Entity | August 31, 1962 | Regala, J.
Nature of the Case: Appeal from CFI of Manila
SUMMARY: In a 1952 criminal case, Alfredo, who was employed by
Isabelo, was convicted for running over the son of Gregorio, causing the
child to suffer simple fracture and was ordered to pay indemnity in the
amount of P500. In 1955, the same jeep was sold and transferred by
Isabelo to Fely Transportation composed of him, his wife, his son, and
two daughters. Since Alfredo was insolvent, Gregorio brought this
present action to enforce subsidiary liability against Fely Transpo. Fely
Transpo moved to dismiss on the ground of lack of cause of action since
the sale and transfer of the jeep by Isabelo to Fely Transpo. was made
on December 24, 1955, long after the driver Alfredo of said jeep had
been convicted and had served his sentence. Lower Court granted the
motion but SC reversed and ruled for Palacio, holding that
DOCTRINE: A corporation should not be heard to say that it has a
personality separate and distinct from its members when to allow it to
do so would be to sanction the use of the fiction of corporate entity as a
shield to further an end subversive of justice.
FACTS:
 Sometime in December 1952, Alfredo Carillo was hired by Isabelo
Calingasan as driver of his jeep.
 On Dec. 24 that same year, said jeep driven by Alfredo ran over
Gregorio’s son, resulting to the latter’s injuries.
 A criminal case was filed against Alfredo wherein he was found guilty
as charged and ordered to pay the Palacios P500, with subsidiary
imprisonment in case of insolvency.
 On December 24, 1955, Isabelo sold and transferred the subject heep
to the Fely Transportation.
 The Palacios then filed this case against Fely Transporation to enforce
subsidiary liability on account of Alfredo’s insolvency.
 Fely Corp. moved to dismiss on the ground of lack of cause of action
and bar by prior judgment since the sale and transfer of the jeepney
took place “long after the driver Alfredo of said jeep had been
convicted and had served his sentence”.
 CFI ruled that the action is barred by the judgment in the criminal case
and, that under Article 103 RPC, the person subsidiarily liable to pay
damages is Isabel Calingasan, the employer, and not the defendant
corporation.
damages in the criminal case because the sale to it of the jeep in
question, after the conviction of Alfredo Carillo in the criminal case
before the CFI of Quezon City, was merely an attempt on the part of
Isabelo Calingasan, its president and general manager, to evade his
subsidiary civil liability.
ISSUE: W/N Fely Transpo can be held subsidiarily liable – YES.
a) Isabelo and Fely Transportation may be regarded as one and the
same person since Isabelo’s main purpose in forming the corporation
was to evade his subsidiary civil liability resulting from the conviction
of his driver, Alfredo.
i. The incorporators of the Fely Transportation are Isabelo, his
wife, his son, and his two daughters. This is one case where the
defendant corporation should not be heard to say that it has a
personality separate and distinct from its members when to
allow it to do so would be to sanction the use of the fiction of
corporate entity as a shield to further an end subversive of
justice.
ii. The failure of the defendant corporation to prove that it has
other property than the jeep strengthens the conviction that its
formation was for the purpose above indicated.
iii. While Isabelo is not a party in this case, yet the Court can
substitute him in place of the defendant corporation as to the
real party in interest [Alonso v. Villamor]. This is so in order to
avoid multiplicity of suits and thereby save the parties
unnecessary expenses and delay.
iv. Accordingly, defendants Fely Transportation and Isabelo should
be held subsidiarily liable for P500 which Alfredo was ordered
to pay in the criminal case but could not on account of
insolvency.
b) Action, not barred by prior judgment in the criminal case.
i. The offended parties in the criminal party were only insisting on
the subsidiary liability of the of the defendant and presented the
TSN in the criminal case in support of their claim. This rules out
the defense of res judicata because such liability proceeds
precisely from the judgment in the criminal action, where the
accused was found guilty.
RULING: Decision of lower court is reversed.