Case Digest: MEL V. VELARDE v. LOPEZ, INC.

MEL V. VELARDE v. LOPEZ, INC.

419 SCRA 422, 14 January 2004, THIRD DIVISION

Lopez Inc., granted a loan to Mel V. Velarde (Mel), the General Manager of Sky Vision which is a subsidiary company owned by Lopez Inc. However, Mel was not able to pay the loan and Lopez Inc. proposed that he may use his retirement benefits to partially settle his loan, but because of disagreement on the amount of his retirement benefits, Mel refused the proposal which led Lopez Inc. to file a complaint for the claim of the payment with interest. On his answer, Mel claims that the loan was only a ”cover document” and that it was really a reward for his loyalty and excellent performance in the company and counterclaimed that he was entitled to a much larger amount of retirement benefits than what Lopez Inc., was alleging.

Lopez Inc., petitioned to dismiss the case for lack of jurisdiction which drew MEL to assert that the veil of corporate fiction must be pierced to hold Lopez Inc., liable for his counterclaims. The Regional Trial Court denied the motion to dismiss and the motion for reconsideration. Lopez Inc., then filed a petition for certiorari to the Court of Appeals which held that Lopez Inc., is not a real party-in-interest on the counterclaim and that there was a failure to show the presence of any of the circumstances to justify the application of the principle of ”piercing the veil of corporate fiction.”

ISSUE:

Whether or not Mel Velarde, on a complaint for collection of sum of money can raise a counterclaim for retirement benefits, unpaid salaries and incentives arising from services rendered by him in a subsidiary company of Lopez Inc.

HELD:

While Mel Velarde correctly invokes the ruling in Atienza v. Court of Appeals to postulate that not every denial of a motion to dismiss can be corrected by certiorari under Rule 65 and that, as a general rule, the remedy from such denial is to appeal in due course after a decision has been rendered on the merits, there are exceptions thereto, as when the court in denying the motion to dismiss acted without or in excess of jurisdiction or with patent grave abuse of discretion, or when the assailed interlocutory order is patently erroneous and the remedy of appeal would not afford adequate and expeditious relief, or when the ground for the motion to dismiss is improper venue, res judicata, or lack of jurisdiction as in the case at bar.

In determining which has jurisdiction over a case, the averments of the complaint “counterclaim” taken as a whole are considered.

With regards to Mel Velarde‘s claim for unpaid salaries, unpaid share in net income, reasonable return on the stock ownership plan and other benefits for services rendered to Sky Vision, jurisdiction thereon pertains to the Securities and Exchange Commission even if the complaint by a corporate officer includes money claims since such claims are actually part of the prerequisite of his position and, therefore interlinked with his relations with the corporation. The question of remunerations involving a person who is not a mere employee but a stockholder and officer of the corporation is not a simple labor problem but a matter that comes within the area of corporate affairs and management as is in fact a corporate controversy in contemplation of the Corporation Code.

Mel Velarde argues nevertheless that jurisdiction over the subsidiary is justified by piercing the veil of corporate fiction. Piercing the veil of corporate fiction is warranted, however, only in cases when the separate legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, such that in the case of two corporations, the law will regard the corporations as merged into one.