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    CALIFORNIA MANUFACTURING COMPANY v. ADVANCED TECHNOLOGY SYSTEM

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    Mac Soriano
    This case involves a dispute between two corporations, CMCI and ATSI. ATSI leased a machine to CMCI, but CMCI stopped paying rent in June 2003. ATSI filed a complaint to collect unpaid rent. CMCI argued its debt to ATSI should be legally compensated by a debt owed to CMCI's affiliate PPPC. However, the courts found no evidence that PPPC actually owed CMCI a certain, liquidated debt. The requirements for legal compensation were not met since the alleged debt between the two affiliates was not clearly proven. Both the trial court and appellate court ruled in favor of ATSI, finding no legal compensation applied.

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    CALIFORNIA MANUFACTURING COMPANY v. ADVANCED TECHNOLOGY SYSTEM

    Uploaded by

    Mac Soriano
    322 views2 pages
    This case involves a dispute between two corporations, CMCI and ATSI. ATSI leased a machine to CMCI, but CMCI stopped paying rent in June 2003. ATSI filed a complaint to collect unpaid rent. CMCI argued its debt to ATSI should be legally compensated by a debt owed to CMCI's affiliate PPPC. However, the courts found no evidence that PPPC actually owed CMCI a certain, liquidated debt. The requirements for legal compensation were not met since the alleged debt between the two affiliates was not clearly proven. Both the trial court and appellate court ruled in favor of ATSI, finding no legal compensation applied.

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    This case involves a dispute between two corporations, CMCI and ATSI. ATSI leased a machine to CMCI, but CMCI stopped paying rent in June 2003. ATSI filed a complaint to collect unpaid rent. CMCI argued its debt to ATSI should be legally compensated by a debt owed to CMCI's affiliate PPPC. However, the courts found no evidence that PPPC actually owed CMCI a certain, liquidated debt. The requirements for legal compensation were not met since the alleged debt between the two affiliates was not clearly proven. Both the trial court and appellate court ruled in favor of ATSI, finding no legal compensation applied.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    322 views2 pages

    CALIFORNIA MANUFACTURING COMPANY v. ADVANCED TECHNOLOGY SYSTEM

    Uploaded by

    Mac Soriano
    This case involves a dispute between two corporations, CMCI and ATSI. ATSI leased a machine to CMCI, but CMCI stopped paying rent in June 2003. ATSI filed a complaint to collect unpaid rent. CMCI argued its debt to ATSI should be legally compensated by a debt owed to CMCI's affiliate PPPC. However, the courts found no evidence that PPPC actually owed CMCI a certain, liquidated debt. The requirements for legal compensation were not met since the alleged debt between the two affiliates was not clearly proven. Both the trial court and appellate court ruled in favor of ATSI, finding no legal compensation applied.

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    © All Rights Reserved
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    CALIFORNIA MANUFACTURING COMPANY v.

    ADVANCED TECHNOLOGY SYSTEM,


    GR No. 202454, 2017-04-25
    Facts:
    Petitioner CMCI is a domestic corporation engaged in the food and beverage manufacturing
    business. Respondent ATSI is also a domestic corporation that fabricates and distributes
    food processing machinery and equipment, spare parts, and its allied products.[4]In August
    2001, CMCI leased from ATSI a Prodopak machine which was used to pack products in 20-
    ml. pouches.[5] The parties agreed to a monthly rental of P98,000 exclusive of tax. Upon
    receipt of an open purchase order on 6 August 2001, ATSI delivered the machine to CMCI's
    plant at Gateway Industrial Park, General Trias, Cavite on 8 August 2001.In November
    2003, ATSI filed a Complaint for Sum of Money[6] against CMCI to collect unpaid rentals for
    the months of June, July, August, and September 2003. ATSI alleged that CMCI was
    consistently paying the rents until June 2003 when the latter defaulted on its obligation
    without just cause. ATSI also claimed that CMCI ignored all the billing statements and its
    demand letter. Hence, in addition to the unpaid rents ATSI sought payment for the
    contingent attorney's fee equivalent to 30% of the judgment award.
    RTC rendered a Decision in favor of ATSI
    The trial court ruled that legal compensation did not apply because PPPC had a separate
    legal personality from its individual stockholders, the Spouses Celones, and ATSI.
    there was no board resolution or any other proof showing that Felicisima's proposal to set-
    off the unpaid mobilization fund with CMCI 's rentals to ATSI for the Prodopak Machine had
    been authorized by the two corporations.
    the CA affirmed the trial court's ruling that legal compensation had not set in because the
    element of mutuality of parties was lacking.
    Issues:
    The assignment of errors raised by CMCI all boil down to the question of whether the CA
    erred in affirming the ruling of the RTC that legal compensation between ATSI's claim
    against CMCI on the one hand, and the latter's claim against PPPC on the other hand, has
    not set in.
    Ruling:
    We affirm the CA Decision in toto.
    The fraud test, which is the second of the three-prong test to determine the application of
    the alter ego doctrine, requires that the parent corporation's conduct in using the subsidiary
    corporation be unjust, fraudulent or wrongful. Under the third prong, or the harm test, a
    causal connection between the fraudulent conduct committed through the instrumentality of
    the subsidiary and the injury suffered or the damage incurred by the plaintiff has to be
    established.[28] None of these elements have been demonstrated in this case. Hence, we
    can only agree with the CA and RTC in ruling out mutuality of patties to justify the
    application of legal compensation in this case.
    Article 1279 of the Civil Code provides:ARTICLE 1279. In order that compensation may be
    proper, it is necessary:(1) That each one of the obligors be bound principally, and that he be
    at the same time a principal creditor of the other;(2) That both debts consist in a sum of
    money, or if the things due are consumable, they be of the same kind, and also of the same
    quality if the latter has been stated;(3) That the two debts be due;(4) That they be liquidated
    and demandable;(5) That over neither of them there be any retention or controversy,
    commenced by third persons and communicated in due time to the debtor.The law,
    therefore, requires that the debts be liquidated and demandable. Liquidated debts are those
    whose exact amounts have already been determined.
    CMCI has not presented any credible proof, or even just an exact computation, of the
    supposed debt of PPPC. It claims that the mobilization fund that it had advanced to PPPC
    was in the amount of P4 million. Yet, Felicisima's proposal to conduct offsetting in her letter
    dated 30 July 2001 pertained to a P3.2 million debt of PPPC to CMCI. Meanwhile, in its
    Answer to ATSI's complaint, CMCI sought to set off its unpaid rentals against the alleged
    P10 million debt of PPPC. The uncertainty in the supposed debt of PPPC to CMCI negates
    the latter's invocation of legal compensation as justification for its non-payment of the
    rentals for the subject Prodopak machine.

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