Rufina Ruy Lim vs.

Court of Appeals (323 SCRA 102) Facts: Rufina Lim is the surviving spouse of Pastor Y. Lim whose estate is the subject of probate proceedings. Private respondents Auto Truck Corporation, Alliance Marketing Corporation, Speed Distributing, Inc., Active Distributing Inc., and Action Company are corporations formed, organized and existing under Philippine laws and which owned real properties. On June 11, 1994, Pastor Y. Lim died intestate. Petitioner, represented by her nephew George Luy, filed a joint petition for the administration of the estate of the deceased. Private respondent corporations, whose properties were included in the inventory of the estate of Pastor Y. Lim, then filed a motion for the lifting of lis pendens and motion for exclusion of certain properties from the estate of the decedent which the court granted. Subsequently, Rufina Lim filed an amended petition alleging that the late Pastor Y. Lim owned the said corporations during his lifetime and that all of their assets, capital and equity were personally owned by the deceased even though they dealt and engaged in business with the public as a corporation. She further stated that the alleged stockholders and officers appearing in the articles of incorporation of the above corporations were mere dummies of Pastor Y. Lim, and they were listed therein only for purposes of registration with the SEC. As such, the trial court ordered the reinstatement of annotation of lis pendens. On appeal, the Court of Appeals found in favour of the respondents. Issue: Whether the assets of the corporations are also assets of the estate Held: A corporation is clothed with personality separate and distinct from that of the persons composing it. It may not generally be held liable for that of the persons composing it. It may not be held liable for the personal indebtedness of its stockholders or those of the entities connected with it. A corporation is vested by law with a personality distinct and separate from its stockholders or members. A corporation is shielded by a protective mantle and imbued by law with a character alien to the persons comprising it. Nonetheless, the shield is not at all times invincible. The corporate mask may be lifted and the corporate veil may be pierced when a corporation is just but an alter ego of a person or another corporation. Where badges of fraud exist, when public convenience is defeated; where a wrong is sought to be justified thereby, the corporate fiction of the notion of legal entity should come to naught. Further, the test in determining the applicability of the doctrine of piercing the veil of corporate fiction is as follows: 1. Control, not mere majority or complete stock control, but complete domination, of finances, policy, business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own; 2. Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive legal duty, or dishonest and unjust act in contravention of plaintiffs legal right; and 3. The aforesaid control and breach of duty must approximately cause the injury or unjust loss complained of. The absence of any of these elements prevents piercing the veil. Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient reason for disregarding the fiction of separate corporate personalities.

General Credit Corporation vs. Alsons Development and Investment Corporation (513 SCRA 225) Facts: General Credit Corporation (GCC) was incorporated in 1957 as a finance and investment company then known as Commercial Credit Corporation (CCC). It established CCC franchise companies in different urban centers in the country. GCC was able to secure a license from Central Bank of the Philippines and SEC to engage in quasi-banking activities. GCC organized CCC Equity Corporation (EQUITY) in 1994 for the purpose of taking over the operations and management of the various franchise companies. At a time material hereto, respondent Alsons Development and Investment Corporation (ALSONS) and Conrado, Nicasio, Editha and Ladislawa Alcantara and Alfredo de Borja (Alcantara Family) each owned shares in the aforesaid GCC franchise companies,e.g., CCC Davao and CCC Cebu. In December 1980, ALSONS and the Alcantara Family sold their shareholdings---101,953 shares---in the CCC franchise companies to EQUITY for Php2million. On January 2, 1981, EQUITY issued ALSONS et.al. a bearer promissory note for Php2million with a one year maturity date and 18% interest per annum. Some four years later, the Alcantara Family assigned its rights and interests over the bearer note to ALSONS which became the holder thereof. Even before the execution of the assignment deal, letters for demand for interest payment were already sent to EQUITY through its President, Wilfredo Labayen, who pleaded inability to pay the stipulated interest, EQUITY no longer having assets or property neither to settle its obligation nor being extended financial support by GCC. On January 14, 1986, ALSONS filed a complaint for a sum of money against EQUITY and GCC. GCC was impleaded as party-defendant for any judgment ALSONS might secure against EQUITY and, under the doctrine of piercing the veil of corporate fiction, against GCC, EQUITY having been organized as a tool and mere conduit of GCC. EQUITY stated that (1) it was purposely organized by GCC for the latter to avoid CB Rules and Regulations on DOSRI limitations, and that it merely acted as intermediary or bridge for loan transactions and other dealings of GCC to its franchises and the investing public, and (2) it is solely dependent upon GCC for its funding requirements; hence, GCC is solely and directly liable to ALSONS, the former having failed to provide EQUITY the necessary funds to meet its obligations to ALSONS. GCC stressed that it is a distinct and separate entity from EQUITY and that the business relationships with each other are always at arms length. The trial court found that EQUITY was an instrumentality or adjunct of GCC and ruled in favour of ALSONS ordering GCC to pay the principal sum with interest, damages and attorneys fees. The appellate court affirmed the decision of the trial court. Issue: Whether there is basis for piercing GCCs veil of corporate entity Held: The Court agrees with the disposition of the appellate court on applying the piercing doctrine to the transaction subject of this case. The trial court enumerated no less than 20 documented circumstances and transactions, which, taken as a whole, strongly supported the conclusion that EQUITY was an adjunct, an instrumentality or business conduit of petitioner GCC. This relation provides a justifying ground to pierce petitioners corporate existence as to ALSONS claim. What the trial court referred to as certain circumstances are the commonality of directors, officers, and stockholders and even sharing of office between petitioner GCC and respondent EQUITY; certain financing and management arrangements between the two, allowing petitioner to handle funds of the latter, the virtual domination if not control wielded by the petitioner over the finances, business policies and practices of respondent EQUITY; and the establishment of respondent EQUITY by the petitioner to circumvent CB rules.

Robledo, et.al. vs. NLRC (238 SCRA 52) Facts: Petitioners were former employees of Bacani Security and Protective Agency (BSPA). They were employed as security guards at different times during the period 1969 to December 1989 when BSPA ceased to operate. BSPA was a single proprietorship managed, owned and operated by the late Felipe Bacani and registered in 1957 with the Bureau of Trade and Industry. On December 31, 1989, Felipe Bacani retired the business name and BSPA ceased to operate effective that day. Earlier on October 26, 1989, respondent Bacani Security and Allied Services Co.,Inc. (BASEC) had been organized and registered as a corporation with the SEC with Felipe Bacani, Alicia Bacani, Lydia Bacani, Amado Eleda and Victoria Aurigue as incorporators. On January 15, 1990, Felipe Bacani died. The purpose of the corporation was to engage in the business of providing security to persons and entities. This was the same line of business that BSPA was engaged in. Most of the employees of BSPA, after losing their jobs, were employed in BASEC. Petitioners filed a complaint for underpayment of wages, separation pay and other benefits and the return of their cash bond which they posted with BSPA. They alleged that the Bacani family merely continued the operation of BSPA by creating BASEC in order to avoid the obligations of the former. The Labor Arbiter ruled in their favour but was reversed on appeal to the NLRC declaring that the Labor Arbiter had no jurisdiction and that petitioners should have filed their claims with the probate court where the settlement of Bacanis estate was pending. Issue: Whether BASEC can be held liable for claims of petitioners against BSPA based on the piercing doctrine or if they were the personal liability of the late Felipe Bacani Held: BASEC is an entity separate and distinct from that of BSPA. BSPA is a single proprietorship owned and operated by Felipe Bacani. Hence, its debts and obligations were the personal obligations of its owner. Petitioners claim which are based on these debts and personal obligations did not survive the death of Felipe Bacani and should have been filed instead in the intestate proceedings involving his estate. Unless expressly assumed, labor contracts are not enforceable against the transferee of an enterprise because they are in personam. Claims for backwages earned from the former employer cannot be filed against the new owners of an enterprise. The doctrine of piercing the veil of corporate entity has no application in this case where the purpose is not to hold individual stockholders liable for the obligations of a corporation but, on the contrary, to hold the corporation liable for the obligation of a stockholder. Piercing the veil of corporate entity means looking through the corporate form to the individual stockholders composing it. There is no reason to pierce the veil of corporate entity because there is no question that petitioners claims, assuming them to be valid, are the personal liability of the late Felipe Bacani. It is immaterial that he was a stockholder or BASEC. Furthermore, BASEC cannot be a mere continuity of BSPA since it was organized before BSPA was retired as business. Also, Felipe Bacani was only one of the five incorporators and he owned the least number of shares in BASEC, which included persons not members of his family. And finally, there was no evidence that the assets of BSPA were transferred to BASEC.

Hi-Cement Corporation vs. Insular Bank of Asia and America (now Equitable PCI Bank) (consolidated with the case of E.T. Henry Tan and Spouses Tan vs. Insular Bank of Asia and America) (543 SCRA 289) Facts: Petitioners Enrique Tan and Lilia Tan (Spouses Tan) were the controlling stockholders of E.T. Henry and Co.,Inc. (E.T. Henry), a company engaged in the business of processing and distributing bunker fuel. Among E.T. Henrys customers were petitioner Hi-Cement Corporation, Riverside Mills Corporation, and Kanebo Cosmetics Philippines, Inc. For their purchases, these corporations issued postdated checks to E.T. Henry. In 1979, E.T. Henry and Insular Bank of Asia and America became engage in re-discounting of checks where E.T. Henry was able to encase, with pre-deducted interest, the postdated checks of its clients. For every transaction, respondent required E.T. Henry to execute a promissory note and a deed of assignment bearing the conformity of the client to the rediscounting. From 1979-1981, E.T. Henry was able to re-discount its clients checks. However, in February 1981, 20 checks of Hi-Cement were dishonoured and so were the checks of Riverside and Kanebo. Respondent filed a complaint for a sum of money claiming damages from the corporations. Respondent also sought to collect from E.T. Henry and the spouses Tan other loan obligations as deficiencies resulting from the foreclosure of the real estate mortgage on E.T. Henrys property in Sucat, Paraaque. The trial court rendered a decision applying the doctrine of piercing the veil of corporate entity to make E.T. Henry and the spouses Tan solidarily liable and was affirmed by the appellate court. Issue: Whether the doctrine of piercing the veil or corporate entity is applicable Held: The lower courts erred in applying the doctrine of piercing the veil or corporate entity in this case. The general rule is that the corporation will be looked upon as a legal entity until sufficient reasons to the contrary appear. It is only when the fiction or notion of legal entity is used to defeat public convenience, justify wrong, perpetuate fraud or defend crime that the law will shred the corporate legal veil and regard it as a mere association of persons. In this case, E.T. Henrys corporate veil should not have been pierced at all. The trial court failed to provide a clear ground why the doctrine was used. It merely stated that it agreed with the respondents arguments but did not explain why the doctrine was relevant to the petitioner. On the other hand, the CA held that the spouses Tan are the controlling stockholders and the business was conducted solely for the benefit if the Spouses Tan. But the mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not in itself sufficient ground for disregarding the separate corporate personality. For this ground to stand, there must be proof that the spouses Tan: 1. Had complete control or complete domination of E.T. Henrys finances and that the latter had no separate existence with respect to the act complained of; 2. Used such control to commit fraud or wrong and; 3. The control was the proximate cause of the loss or injury complained of by respondent. The records of this case do not show that these elements were present.