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RESTATEMENT OF THE DOCTRINE OF PIERCING THE VEIL OF CORPORATE FICTION

by

CESAR L. VILLANUEVA, B.S.C, LL.B., LL.M. The title of this paper may expectedly lead to the impression that the main thrust would be to rehash existing decisions on the doctrine of piercing the veil of corporate fiction. Although that would be the process, the aim of this paper is to emphasize more the complementary relationship of the piercing doctrine to the main doctrine that a corporation has a juridical personality separate and distinct from the stockholders or members who compose it. Looking at the number of decisions rendered by the upreme !ourt where it has pierced the veil of corporate fiction, compared with the handful of decisions by which it has refused to apply the piercing doctrine and instead affirmed the main doctrine of separate juridical personality, may give one the impression that the main doctrine has lost some of its vitality, and that the piercing doctrine has grown lush and vital. "t is always comforting to note, especially for businessmen for whom the corporate entity has undoubtedly become the most popular medium to pursue business endeavors, that the viability and vitality of a doctrine is to be tested not by the times it has been challenged and overcome in court decisions, but by the usefulness and fre#uency of its employment in the market place. The enormity of the number of upreme !ourt decisions applying the piercing doctrine does not even begin to show the thousands and thousands of daily transactions negotiated and completed employing the corporate entity without hitch. $hen dealing with piercing cases, it is always important consider that the aim which is, or at least should be, sought to be achieved by the !ourt is not to use the piercing doctrine as a ram to break down the ramparts of the main doctrine of separate juridical personality, but more properly for the ancillary piercing doctrine to act as a regulating valve by which to preserve the powerful engine that is the main doctrine of separate juridical personality. "t is important therefore to consider that the vitality of the main doctrine of separate juridical personality is essential in preserving and promoting the corporation as an entity by which the business community can continue to harness capital resources and undertake either risky or large%scale enterprises& and that the development of the piercing doctrine should not act in competition with, but rather to complement and make more vital, the main doctrine of separate juridical personality.

". The 'ain (octrine of eparate )uridical *ersonality ince its introduction in the *hilippines in +,-., the corporation has been defined as /an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence./ This same definition has been adopted by ection 0 of the present !orporation !ode, and is the basis of the main doctrine that a corporation being a juridical person has a personality separate and distinct from the stockholders or members who compose it. The granting to the corporate entity of a strong separate juridical personality has been considered as the attribute or privilege most characteristic of the corporation. 1nlike the cumbersome juridical personality of its nearest rival, the partnership, the separate juridical personality of the corporation has features that has made it most attractive to businessmen2 right of succession, limited liability, centralized management, and generally free transferability of shares of stock. Therefore, an undermining of the separate juridical personality of the corporation, such as the application of the piercing doctrine, necessarily dilutes any or all of these attributes. The stability of the main doctrine of separate juridical personality is inextricably linked with the attractiveness of the corporation as an efficient medium by which businessmen can pursue business enterprises. And the undermining of the main doctrine would also compel businessmen to have to enter into inefficient and costly contractual relations to fill the gaps created by a flawed main doctrine. The !ourt has not been wanting in paying lip service to the main doctrine of separate juridical personality, especially in recent years, when it seems, at every turn, a proposition to pierce the veil of corporate fiction has become a knee%jerk reaction in most litigations involving corporate parties. 3owever, as discussed in this paper, the !ourt has not really taken a clear and direct path on the main doctrine vis%a%vis the piercing doctrine. "n tockholders of 4. 5uanzon and ons, "nc. v. 6egister of (eeds of 'anila, the distribution of the corporate properties to the stockholders was deemed not in the nature of a partition among co%owners, but rather a disposition by the corporation to the stockholders, as opposite parties to a contract. "t held that /7a8 corporation is a juridical person distinct from the members composing it 7and that8 7p8roperties registered in the name of the corporation are owned by it as an entity separate and distinct from its members. $hile shares of stock constitute the personal property, they do not represent property of the corporation. x x x A share of stock only typifies an ali#uot part of the corporation9s property, or the right to share in its proceeds to that extent when distributed according to law and e#uity, but its holder is not the owner of any part of the capital of the corporation, nor is he entitled to the possession of any definite portion of its property or assets. The stockholder is not a co%owner or tenant in common of the corporate property./ 'anila 5as !orp. v. !ollector of "nternal 6evenue held that the tax exemptions granted to a corporation do not pertain to its corporate stockholders due to their separate corporate personalities. /A corporation has a personality distinct from that of its stockholders, enabling the taxing power to reach the latter when they receive dividends from the corporation. "t must be considered as settled in this jurisdiction that dividends of a domestic corporation which are paid and delivered in cash to foreign corporations as

stockholders are subject to the payment of the income tax, the exemption clause to the charter 7of the domestic corporation8 notwithstanding./ Likewise, attempts by stockholders to intervene in suits against their corporations have been struck down in 'agsaysay%Labrador v. !ourt of Appeals on the basic premise that a party may intervene under remedial provisions if he has a legal interest in the matter in litigation& but that stockholders9 right in corporate property is purely inchoate and will not entitle them to intervene in a litigation involving corporate property. 'agsaysay%Labrador held that a majority stockholder9s interest in corporate property, /if it exists at all, x x x is indirect, contingent, remote, conjectural, 7in8conse#uential and collateral. At the very least, their interest is purely inchoate, or in sheer expectancy of a right in the management of the corporation and to share in the profits thereof and in the properties and assets thereof on dissolution, after payment of the corporate debts and obligations./ /$hile a share of stock represents a proportionate or ali#uot interest in the property of the corporation it does not vest the owner thereof with any legal right or title to any of the property, his interest in the corporate property being e#uitable or beneficial in nature. hareholders are in no legal sense the owners of corporate property, which is owned by the corporation as a distinct legal person./ "n aw v. !ourt of Appeals the !ourt refused the petition for intervention filed by the stockholders in a collection case covering the loans of the corporation on the ground that the interest of shareholders in corporate property is purely inchoate& and this purely inchoate interest will not entitle them to intervene in a litigation involving corporate property. And vice%versa in ulo ng :ayan v. Araneta, "nc. where an attempt by a non%stock and non%profit corporation organized for the benefit of its members to bring a suit in behalf of its members for the recovery of certain parcels of land owned by the members was not allowed by the !ourt. "n Traders 6oyal :ank v. !ourt of Appeals, an action sought to make officers and stockholders liable for corporate debts on the basis of such relationship alone was turned down by the !ourt. /The corporate debt or credit is not the debt or credit of the stockholder nor is the stockholder9s debt or credit that of the corporation./ !ruz v. (alisay held that the mere fact that one is president of the corporation does not render the property he owns or possesses the property of the corporation, since the president, as an individual, and the corporation are separate entities. "n 5ood ;arth ;mporium, "nc. v. !ourt of Appeals the !ourt in refusing to allow execution of a judgment debt of a corporation against the officer, held that being an officer or stockholder of a corporation does not by itself make one9s property also of the corporation, and vice%versa, for they are separate entities, and that shareholders are in no legal sense the owners of corporate property which is owned by the corporation as a distinct legal person. (evelopment :ank of *hilippines v. <L6! held that ownership of a majority of capital stock and the fact that a majority of directors of a corporation are the directors of another corporation created no employer%employee relationship, nor did it make the controlling stockholder liable for employees9 claim of the subject corporation. ;arlier,

Liddell = !o. v. !ollector of "nternal 6evenue expressed the principle that mere ownership by a single stockholder or by another corporation of all or nearly all capital stocks of the corporation is not by itself sufficient ground for disregarding the separate corporate personality. Likewise, 1mali v. !ourt of Appeals held that the mere fact that the businesses of two or more corporations are interrelated is not a justification for disregarding their separate personalities, absent sufficient showing that the corporate entity was purposely used as a shield to defraud creditors and third persons of their rights. ubstantial ownership in the capital stock of a corporation entitling the shareholder a significant vote in the corporate affairs allows them no standing or claims pertaining to corporate affairs. "". Application of the *iercing (octrine The main doctrine of separate juridical personality is to be tempered by the supporting doctrine of piercing the veil of corporate fiction. ince both theories were transported to *hilippine jurisdiction as part and parcel of the implantation of American !orporation Law, the source of the piercing doctrine is also common law. :ut the magical words by which the piercing doctrine has come to be known found their origins in the case of 1nited tates v. 'ilwaukee 6efrigerator Transit !o.2 /"f any general rule can be laid down, in the present state of authority, it is that a corporation will be looked upon as a legal entity as a general rule, and until sufficient reason to the contrary appears& but, when the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons./ The main treatment of the piercing doctrine by both corporate practitioners and their clients has always been how to prevent its being applied by the courts to their particular situation and avoid the dire conse#uences of piercing, which is mainly holding the associates in the venture personally liable for corporate obligations. Therefore, the discussions below study the main features of each of the three general classes of piercing cases, so that in actual practice counsel and their clients would know how to properly structure their transactions to avoid inviting the /ire/ of judicial bodies. <ature and !onse#uences of *iercing % 1mali v. !ourt of Appeals has held that when the piercing doctrine is applied in a case, the conse#uences would be that the members or stockholders of the corporation will be considered as the corporation, that is, liability will attach directly to the officers and stockholders. The application of the piercing doctrine is not a contravention of the principle that the corporate personality of a corporation cannot be collaterally attacked. >oppel ?*hil.@, "nc. v. Aatco held that when the piercing doctrine is applied against a corporation in a particular case, the court does /not deny legal personality x x x for any and all purposes./ The application of the piercing doctrine is therefore within the ambit of the principle of res adjudicata that binds only the parties to the case only to the matters actually resolved therein. Thus, even when a corporation9s legal personality had been pierced in another case, it was held in Tantongco v. >aisahan ng mga 'angagawa sa La !ampana and !"6 such corporation still possessed such separate juridical personality in any other case.

ince the piercing doctrine was fashioned to prevent fraud, or injustice, it would have no application in situations where no fraud or injustice would be prevented by the application of such doctrine, as to make officers and stockholders liable for corporate debts. Thus in 1mali, the !ourt refused the plea to pierce the veil of corporate fiction to achieve a remedy of declaring void foreclosure proceedings on the ground that /the legal corporate entity is disregarded only if it is sought to hold the officers and stockholders directly liable for a corporate debt or obligation. "n the instant case, petitioners do not seek to impose a claim against the individual members of the three corporations involved& on the contrary, it is these corporations which desire to enforce an alleged right against the petitioners./ o also, in :oyer%6oxas v. !ourt of Appeals the !ourt held that since piercing is used only when the corporation is used /as a cloak or cover for fraud or illegality, or to work injustice, or where necessary to achieve e#uity or when necessary for the protection of creditor,/ then it cannot be resorted to to merely establish a right or interest, and in that case the !ourt did not allow piercing when it was resorted to justify under a theory of co% ownership the continued use and possession by stockholders of corporate properties. !ruz v. (alisay held that piercing of the veil of corporate fiction is a judicial remedy not available to a sheriff. "n !ruz, the executing sheriff when it could not locate properties of the corporation to enforce a judgment debt, chose to pierce the veil of corporate fiction and levied on the properties of the president who was also the majority stockholder of the corporation. The !ourt overruled such actuation because the sheriff had usurped /a power belonging to the court./ 3owever, as will be discussed hereunder, the pronouncement in !ruz does not s#uare with previous decisions of the !ourt where administrative application of the piercing doctrine, such as by the :ureau of "nternal 6evenue to uphold tax assessments, have been upheld. *roperly, therefore, the more appropriate application of !ruz would be that the administrative determination of the facts upon which the piercing doctrine is to be applied is subject to judicial or #uasi%judicial review, as the case may be. """. !lassification of the *iercing !ases A review of the piercing cases decided by the !ourt would point out their classification into three ?B@ major areas2 ?a@ $hen the corporate entity is used to commit fraud or to do a wrong ?/fraud cases/@& ?b@ $hen the corporate entity is merely a farce since the corporation is merely the alter ego, business conduit or instrumentality of a person or another entity ?/alter ego cases/@& and ?c@ $hen the piercing the corporate fiction is necessary to achieve justice or e#uity ?/e#uity cases/@.

$hen the corporate entity is used to commit a wrong or to achieve fraud, although necessarily you may also achieve an alter ego scenario, the main distinction between the fraud cases of piercing from the mere alter ego cases of piercing is that in the former there is always an element of malice or evil motive, while in the latter case, even in the absence of an evil motive, piercing would be allowed. The third category of e#uity cases has mainly become the /dumping ground/ or perhaps the /added flourish/ of the !ourt when it has to apply the piercing doctrine but cannot find it convenient to do so because no evil had been sought to be achieved, but at the same time the corporate juridical personality of the subject corporation has always been respected. The three ?B@ cases of piercing may appear together as in 6.4. ugay v. 6eyes where an attempt by the corporation to avoid liability by distancing itself from the acts of the its *resident, 'r. 6omulo 4. ugay, alleging that he acted as agent for another corporation was brushed aside by the !ourt when it held that /the dual roles of 6omulo 4. ugay should not be allowed to confuse the facts relating to employer%employee relationship x x x 7i8t being a legal truism that when the veil of corporate fiction is made as a shield to perpetrate a fraud andCor confuse legitimate issues ?here, the relation of employer%employee@, the same should be pierced. Derily, the 6.4. ugay = !o., "nc. is a business conduit of 6.4. ugay./ "D. 4raud !ases 5regorio Araneta, "nc. v. Tuason de *aterno and Didal held that the piercing doctrine is employed to prevent the commission of fraud and cannot be employed to perpetuate a fraud. "n that case, Tuason sold lots to 5. Araneta "nc. ubse#uently, the corporation filed a case against Tuason to compel delivery of clean title to said lots. Tuason claimed that the sale was made to her agent, )ose Araneta, president of the buying corporation, and therefore the corporate fiction should be disregarded, the sale being not valid as it was made to an agent of the seller. The !ourt ruled that corporate fiction will not be disregarded because the corporate entity was not used to perpetuate fraud nor circumvent the law and the disregard of the technicality would pave the way for the evasion of a legitimate and binding commitment, especially since Tuason was fully aware of the position of 'r. Araneta in the corporation at the time of sale. ince the piercing doctrine is meant to prevent the commission of fraud& it has no application to allow persons or entities to gain advantages. "n addition, the application of the piercing doctrine is a remedy of last resort and will not be applied, even in case of fraud, if other remedies are available to the parties. Thus, in 1mali the !ourt refused to apply the piercing doctrine since the petitioners were /merely seeking the declaration of the nullity of the foreclosure sale, which relief may be obtained without having to disregard the aforesaid corporate fiction attaching to respondent corporations, 7especially since8 petitioners failed to establish by clear and convincing evidence that private respondents were purposely formed and operated, and thereafter transacted with petitioners, with the sole intention of defrauding the latter./

"n !ommissioner of "nternal 6evenue v. <orton and 3arrison where the parent corporation owned all the outstanding stocks of the subsidiary corporation& where parent corporation financed all the operations of the subsidiary& where the parent treated the subsidiary9s employees as its own& where the officers of both corporations were located in the same compound& where the board of the subsidiary was constituted in such a way to enable the parent to actually direct and manage subsidiary9s affairs by making the same officers of the board for both corporations& and where the fiction of corporate entity was being used as a shield for tax evasion by making it appear that the original sale was made by the parent corporation to the subsidiary corporation in order to gain tax advantage, the !ourt did not hesitate to pierce the veil of corporate fiction and treat as void the sales between the corporations. ince <orton and 3arrison is a fraud case, you begin to wonder why there was a need to show that the subsidiary corporation was being used as an instrumentality or conduit of the parent corporation, since even in the absence of such evidence, piercing to prevent fraud ?i.e., tax evasion@ would have been warranted. 'ust fraud cases be necessarily accompanied by alter ego element to make a fraud case stick for application of the piercing doctrineE "t would seem not to be necessarily so, because fraud is a matter of proof, and often it is a state of the mind being founded on malice. "n order to establish the state of mind of the stockholders or officers to make them liable for corporate debts, or as in the case of <orton and 3arrison, in order to consider two separate entities as one and the same, there is an imperative need to detail the circumstances which show that the corporate fiction is being used consciously as a means to commit a fraud. "n short, the alter ego circumstances may be needed to prove the malicious intent of the parties. "n <amarco v. Associated 4inance !o. it was held that where a stockholder, who has absolute control over the business and affairs of the corporation, entered into a contract with another corporation through fraud and false representations, such stockholder shall be liable jointly and severally with his co%defendant corporation even when the contract sued upon was entered into on behalf of the corporation. <amarco demonstrated when a fraud case overlaps in an alter ego case, as the !ourt held2 /$e feel perfectly justified in Fpiercing the veil of corporation fiction9 and in holding ycip personally liable, jointly and severally with his co%defendant, for the sums of money adjudged in favor of the appellant. "t is settled law in this and other jurisdictions that when the corporation is the mere alter ego of person, the corporate fiction may be disregarded& the same being true when the corporation is controlled, and its affairs are so conducted as to make it merely an instrumentality, agency or conduit of another./ Gther than having entered in the name of a corporation a fraudulent contract, which normally the board of directors would never have approved of, there is no finding in <amarco of a consistent practice of ycip using the corporation as an alter ego. Therefore, in fraud cases, the alter ego concept pertains to employing the corporation even for a single transaction, to do evil, unlike in pure alter ego cases, where the courts go into systematic findings of utter disregard and disrespect of the separate juridical person of the corporation.

"n *alacio v. 4ely Transportation !o. where it was found that an incorporator9s main purpose in forming the corporation was to evade his subsidiary civil liability resulting from the conviction of his driver, the corporation was made liable for such subsidiary liability by denial of the plea that it had a separate juridical personality and could not be held liable for the personal liabilities of its stockholder. The !ourt took into consideration as part of the attempt to do fraud the fact that the only property of the corporation was the jeep owned by the main stockholder involved in the accident. "n Dilla 6ey Transit, "nc. v. 4errer the !ourt held that when the fiction of legal entity is /urged as a means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing obligation, the circumvention of statutes, the achievement or perfection of a monopoly or generally the perpetration of knavery or a crime, the veil with which the law covers and isolates the corporation from the members or stockholders who compose it will be lifted to allow for its consideration merely as an aggregation of individuals./ "n that case, the !ourt pierced the veil of corporate fiction to enforce a non% competition clause entered into by its controlling stockholder. Liability of Gfficers % The general rule is laid down in *alay, "nc. v. !lave that unless /sufficient proof exists on recordH that an officer ?here a *resident and controlling stockholder@ has /used the corporation to defraud private respondent/ he cannot be made personally liable /just because he Fappears to be the controlling stockholder.9/ /'ere 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 ground for disregarding the separate corporate personality./ *abalan v. <ational Labor 6elations !ommission held that /7t8he settled rule is that the corporation is vested by law with a personality separate and distinct from the persons composing it, including its officers as well as from that of any other entity to which it may be related x x x 7and an officer8 acting in good faith within the scope of his authority x x x cannot be held personally liable for damages./ *abalan refused to hold the officers of the corporation personally liable for corporate obligations on employees9 wages, since /7i8n this particular case complainants did not allege or show that petitioners, as officers of the corporation deliberately and maliciously designed to evade the financial obligation of the corporation to its employees, or used the transfer of the employees as a means to perpetrate an illegal act or as a vehicle for evasion of existing obligation, the circumvention of statutes, or to confuse the legitimate issues./ "n 6.4. ugay v. 6eyes an attempt by the corporation to avoid liability by distancing itself from the acts of the its *resident was struck down with the !ourt holding that a corporation may not distance itself from the acts of a senior officer2 /the dual roles of 6omulo 4. ugay should not be allowed to confuse the facts./ To the same effect is the ruling in *aradise auna 'assage !orporation v. <g where it was held that an officer% stockholder who is a party signing in behalf of the corporation to a fraudulent contract cannot claim the benefit of separate juridical entity2 /Thus, being a party to a simulated contract of management, petitioner 1y cannot be permitted to escape liability under the said contract by using the corporate entity theory. This is one instance when the veil of corporate entity has to be pierced to avoid injustice and ine#uity./

3owever, in the field of labor, liability of corporate officers for corporate obligations to employees seems to have taken two different strains. "n A.!. 6ansom Labor 1nion%!!L1 v. <ational Labor 6elations !ommission the !ourt in interpreting the Labor !ode held that since a corporate employer is an artificial person, it must have an officer who can be presumed to be the employer, being the /person acting in the interest of ?the@ employer/ as provided in the Labor !ode. Therefore, A.!. 6ansom held that /the responsible officer of the employer corporation can be held personally, not to say even criminally, liable for non%payment of backwages& and that in the absence of definite proof as to the identity of an officer or officers of the corporation directly liable for failure to pay backwages, the responsible officer is the president of the corporation jointly and severally with other presidents of the same corporation./ "n effect, A.!. 6ansom would hold a corporate officer liable for corporate obligations by the mere fact that he is the highest officer even when there is no proof that he acted in the particular matter for the corporation. "n (el 6osario v. <ational Labor 6elations !ommission the !ourt ?stating that the doctrine in A.!. 6ansom inapplicable without further explanation@ refused to allow a writ of execution against the properties of officers and stockholders for a judgment rendered against the corporation which was later found without assets on the ground that /7b8ut for the separate juridical personality of a corporation to be disregarded, the wrongdoing must be clearly and convincingly established. "t cannot be presumed./ "n addition, it was held that /The distinguishing marks of fraud were therefore clearly apparent in A.!. 6ansom. A new corporation was created, owned by the same family, engaging in the same business and operating in the same compound./ "n short, (el 6osario re%affirmed the original doctrine before A.!. 6ansom pronouncement that in order for a corporate officer or stockholder to be held liable for corporate debts it must clearly be shown that he had participated in the fraudulent or unlawful act. This principle was reinforced in $estern Agro "ndustrial !orporation v. !ourt of Appeals which held that a corporate officer cannot be held personally liable for a corporate debt simply because he had executed the contract for and in behalf of the corporation. "t held that when a corporate officer acts in behalf of a corporation pursuant to his authority, is /a corporate act for which only the corporation should be made liable for any obligations arising from them./ Two months after (el 6osario, the !ourt in 'aglutac v. <ational Labor 6elations !ommission, held a corporate officer liable for the claims against the corporation, relying upon the A.!. 6ansom ruling but only with respect to the doctrine that the responsible officer of a corporation who had a hand in illegally dismissing an employee should be held personally liable for the corporate obligations arising from such act. "n ummary % 4rom all the foregoing, what clearly comes out as the guiding rule is that piercing is allowed in fraud cases only when the following elements are present2 ?a@ There must have been fraud or an evil motive in the affected transaction, and the mere proof of control of the corporation by itself would not authorize piercing& and

?b@ The main action should seek for the enforcement of pecuniary claims pertaining to the corporation against corporate officers or stockholders. 4raud cases re#uiring the application of piercing doctrine should therefore be properly perceived as viewing the corporate entity from outside%%from the position of those in the business community who have to deal with corporations on the other side of the bargaining table. "f shady businessmen can hide behind the fortress of the separate juridical personality, then it would make dealings with corporations more tentative since the outside party must demand additional assurances ?such as joint and solidary undertaking by key officers and stockholders on corporate liabilities@ from the players behind the corporate facade. *iercing in fraud cases therefore is an assurance to the dealing public that in cases of mischief by the actors behind the corporation, the piercing doctrine allows them remedy against the very actors themselves. This safety hatch in fact makes the corporate entity attractive not only for the businessmen who employ it, but also on the part of the parties who have to contract with such corporate entities. "n addition, a basic public policy abounds in fraud cases, similar to the doctrine of why in criminal corporate acts it is the actor behind the corporation and not the corporate entity that is liable for the criminal prosecution. $ithout the fraud cases of piercing, then the corporate entity would become a shield behind which unscrupulous businessmen can hide and perhaps even become dangerously aggressive in undertaking shady deals because they would never have to be personally liable for their fraudulent or unlawful acts. To maintain the separate juridical personality under such circumstances would therefore encourage fraudulent activities within society, and instead of making the corporation an attractive medium, the dastardly deals by which it would be exploited absent the piercing doctrine, would in fact put corporate entities at the periphery or perhaps even in the underworld of business dealings. D. Alter ;go !ases The first *hilippine case to apply the piercing doctrine was actually Arnold v. $illets and *atterson, Ltd., and it was clearly an alter ego case. "t expressed the language of piercing doctrine when applied to alter ego cases, as follows2 /$here the stock of a corporation is owned by one person whereby the corporation functions only for the benefit of such individual owner, the corporation and the individual should be deemed the same./ "n Arnold the creditors9 committee of the corporation opposed the payment of compensation due to the plaintiff Arnold under a contract%letter signed by $illits, the controlling stockholder, without board approval. The signing president was the controlling stockholder of the corporation. The !ourt held the validity of contract and /7a8lthough the plaintiff was the president of the local corporation, the testimony is conclusive that both of them were what is known as a one man corporation, and $illits, as the owner of all the stocks, was the force and dominant power which controlled them./

"n La !ampana !offee 4actory v. >aisahan ng 'anggagawa, Tan Tong and his family owned and controlled two corporations, one engaged in the sale of coffee and the other in starch. :oth corporations had one office, one management and one payroll& and the laborers of both corporations were interchangeable. The .- members of the labor association in the coffee and starch factories demanded for higher wages addressed to /La !ampana tarch and !offee 4actory./ La !ampana !offee 4actory sought dismissal of the petition on the ground that the starch and coffee factory are two distinct juridical persons. The !ourt disregarded the fiction of corporate existence and treated the two companies as one. "t should be noted that cases like La !ampana !offee 4actory, where the issue was the jurisdiction of the !ourt of "ndustrial 6elations to hear the matter, show that unlike in fraud cases where there must be a pecuniary claim as enunciated in 1mali, in alter ego cases no such pecuniary claim need be involved to allow the courts to apply the piercing doctrine. o also in 'arvel :uilding v. (avid where corporate properties were sought to be sold by the :"6 in order to enforce payment of the tax liabilities of its stockholder, !astro. "t was found that !astro and ten others incorporated 'arvel :uilding !orporation. The :"6 assessed on !astro war profit taxes for properties formerly in the name of !astro but which were later transferred to the corporation. "t seemed that the ten other incorporators were mere dummies. The !ourt upheld the :"6 finding that the corporation was a mere alter ego of the !astro as it appeared that she had enormous profits and accordingly had the motive to set up such a title%holding shield& that duplicate stock certificates had been issued to various purported stockholders lacking the means to pay their alleged subscriptions and no receipts issued for subscriptions paid& that no stockholder9s or director9s meeting was held& that the books of account treated everything as belonging to and controlled by !astro. Although it would seem that 'arvel should be classified as a fraud case ?evasion of taxes@, this would not seem to be so under that case. "n Autivo ons 3ardware v. !ourt of Tax Appeals Autivo ons and 3ardware !o. imported cars and trucks, which it sold to outhern 'otors "nc. ales taxes were paid by Autivo on this first sale. outhern 'otors sold the vehicles to the public. The !ollector of "nternal 6evenue sought to impose sales tax not on the basis of Autivo9s sales to outhern 'otors but on outhern 'otor9s higher sales to the public. To this the !ourt agreed. Although it found that outhern 'otors was not organized to perpetuate fraud& however, outhern 'otors was indeed actually owned and controlled by Autivo as to make it a mere subsidiary or branch of the latter. Autivo, through common officers and directors exercised full control over outhern 'otor9s cash funds, policies, expenditures and obligations. "n Liddell = !o. v. !ollector of "nternal 6evenue, Liddell = !o was engaged in importing and retailing cars and trucks. 4rank Liddell owned ,IJ of its stocks. Later Liddell 'otors "nc. was organized to do for retailing for Liddell = !o. 4rank9s wife owned almost all its stocks. ince then, Liddell = !o. paid sales tax on the basis of its sales to Liddell 'otors. :ut the !ollector of "nternal 6evenue considered the sales by Liddell 'otors to the public as the basis for the original sales tax. The !ourt agreed with the !ollector. 4rank owned both corporations as his wife could not have had the money to pay her subscriptions. uch fact alone though not sufficient to warrant piercing, but under the proven facts of the case, Liddell 'otors was the medium created by Liddell = !o. to

reduce its tax liability. A taxpayer has the legal right to decrease, by means which the law permits, the amount of what otherwise would be his taxes or altogether avoid them& but a dummy corporation serving no business purposes other than as a blind, will be disregarded. Autivo and Liddell ?and therefore 'arvel@ are alter ego cases and not fraud cases although the clear intention of parties was to minimize taxes and the !ourt clearly decreed that no imposition of surcharge by virtue of fraud was imposable by the :"6. The !ourt held in a language sweet to the ears of businessmen and tax lawyers that /the legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted x x x 7and8 a taxpayer may gain advantage of doing business thru a corporation if he pleases, but the revenue officers in proper cases, may disregard the separate corporate entity where it serves but as a shield for tax evasion and treat the person who actually may take the benefits of the transactions as the person accordingly taxable./ Therefore, no less than the !ourt has stated that the use of the corporate entity to gain a vantage ?such as minimization of taxation@ is not by itself a fraudulent scheme. The corporate entity is there for both businessmen and lawyers to tinker with, to gain every advantage available under the law, and that alone is not a reprehensible act. "n 6amirez Telephone !orp. v. :ank of America 6amirez had unpaid rents due 3erbosa. The latter sought to garnish 6amirez9s bank account, but no such personal account existed, and only an account in the name of 6amirez Telephone !ompany could be found and was garnished. The !ourt held that the corporate bank account could be garnished despite the fact that 6amirez himself leased 3erbosa9s premises because2 although 6amirez was the tenant, the company in truth occupied the premises& 6amirez paid the rents with checks of the telephone company& and KLJ of the shares of the company belonged to 6amirez and his wife. "n 'adrigal hipping v. Gglivie, the crew members of / :ridge/ brought an action against 'adrigal hipping !ompany for recovery of unpaid salaries. 3owever, it seemed that 'adrigal = !o. was the registered owner of such vessel. The !ourt held that granting that it was not the 'adrigal hipping !o. that owned the vessel but actually 'adrigal = !o., a corporation with a juridical personality distinct from the former, yet as the former was the subsidiary of the latter, and as found by the facts that it was a business conduit for the latter, the fiction of corporate existence may be disregarded to make the former liable for the claims. Lately, ibagat Timber !orp.v. 5arcia held that /where it appears that two business enterprises are owned, conducted, and controlled by the same parties, both law and e#uity will, when necessary to protect the rights of third persons, disregard the legal fiction that two corporations are distinct entities, and treat them as identical./ "n 'c!onnel v. !ourt of Appeals, a forcible entry case, the corporation was ordered to pay damages, but such corporation was later found without enough assets, so the defendant went after the properties of the stockholders. The !ourt decided for piercing, holding the stockholders liable for the deficiency. Although it held that mere ownership of all and nearly all of the stocks does not make a corporation a business conduit of the stockholders, but in that case, the operation of the corporation was so

merged with those of the stockholders as to be practically indistinguishable. 4urthermore, they had the same office, the funds were held by the stockholders, and the corporation had no visible assets. Gne cannot be sure whether 'c!onnel is clearly an alter ego case or a fraud case of piercing, since the !ourt has cited and fused together the magical 'ilwaukee chants on piercing in fraud cases together with the alter ego formula. <o fraud seems to have been intimated in the decision since it based its conclusion more on the findings of the lower court that /7t8he evidence clearly shows that these persons completely dominated and controlled the corporation and that the functions of the corporation were solely for their benefits./ 3owever, it is in 'c!onnel where the !ourt took special notice of the fact that /7t8he corporation itself had no visible assets, as correctly found by the trial court, except perhaps the toll house, the wire fence around the lot and the signs thereof. "t was for this reason that the judgment against it could not be fully satisfied./ (o we imply from 'c!onnel that the incorporation of an entity without reasonable assets to support the undertaking or venture for which it is organized constitute a fraud against the corporate creditorsE 4rom the language in 'c!onnel, it would not seem so, since after noting the lack of visible assets of the corporation, the !ourt held2 /The facts thus found can not be varied by us, and conclusively show that the corporation is a mere instrumentality of the individual stockholders, hence the latter must individually answer for the corporate obligations. $hile the mere ownership of all or nearly all of the capital stock of a corporation 7does not make it8 a mere business conduit of the stockholder, that conclusion is amply justified where it is show, as the case before us, that the operation of the corporation were so merged with those of the stockholders as to be practically indistinguishable from them. To hold the latter liable for the corporation9s obligation is not to ignore the corporation9s separate entity, but merely to apply the established principle that such entity can not be invoked or used for purposes that could not have been intended by the law that created that separate personality. 1nder%capitalizing a corporate entity ?as distinguished from siphoning off corporate assets@ is therefore a species of alter ego cases, especially so when it is never considered prudent business practice for ventures to shoulder all the capital needed for the venture when credit therefor is available. Thus, leveraging is an accepted, and indeed idealized, business practice. 'ore importantly, most corporate creditors extend credit to the corporation after having studied the financial statements of the corporation, and the allegation of under%capitalization would have been apparent from such statements. !orporate creditors therefore extend credit fully aware of the risk involved in case of under%capitalization, and the element of fraud generally does not attain by that fact alone. *arent% ubsidiary 6elationship % The alter ego doctrine has had an uneven application in the area of parent%subsidiary relationship. $e start with the premise laid down in Liddell = !o., "nc. v. !ollector of "nternal 6evenue2 /"t is of course accepted that the mere fact that one or more corporations are owned and controlled by a single stockholder is not of itself sufficient ground for disregarding separate corporate entities. Authorities support the rule that it is lawful to obtain a corporation charter, even when a single substantial stockholder, to engage in a

specific activity, and such activity may co%exist with other private activities of the stockholder. "f the corporation is a substantial one, conducted lawfully and without fraud on another, its separate identity is to be respected. Thus, although ownership of the controlling capital stock of the corporation by itself would not authorize piercing, but when existing together with other factors, the courts have given much weight to such control feature to pierce. "n >oppel ?*hil.@, "nc. v. Aatco the !ourt held that virtual control of the shareholdings of a corporation would lead to certain legal conclusions. The !ourt could not overlook the fact that in the practical working of corporate organizations of the class to which the two entities belonged, the holder or holders of the controlling part of the capital stock of the corporation, particularly where the control is determined by the virtual ownership of the totality of the shares, dominate not only the selection of the board of directors but, more often than not, also the action of that board. The !ourt was wont to conclude that /7a8pplying this to the instant case, we can not conceive how the *hilippine corporation could effectively go against the policies, decisions, and desires of the American corporation x x x. <either can we conceive how the *hilippine corporation could avoid following the directions of the American corporation in every other transaction where the had both to intervene, in view of the fact that the American corporation held ,,.L per cent of the capital stock of the *hilippine corporation. x x x/ $e seem to draw from >oppel the principle that control of the shareholdings of the corporation necessarily means by itself control of the operations of the corporation. 4ortunately, the pronouncements in >oppel should not constitute precedents in alter ego cases simply because >oppel actually involved a fraud case of piercing, and there were in fact numerous findings in the decision where the subsidiary corporation was made an instrumentality of the parent corporation. The afore%#uoted Liddell pronouncements have been re%affirmed in (evelopment :ank of the *hilippines v. <ational Labor 6elations !ommission where although (:* was the majority stockholder of *hilippine melters !orporation ?* !@, and that majority of the latter9s board members came from (:*, and (:* was the mortgagee to practically all the latter9s properties, still the !ourt refused to pierce the veil of corporate fiction to make (:* liable for the claims of the employees of * !. /$e do not believe that these circumstances are sufficient indicia of the existence of an employer%employee relationship as would confer jurisdiction over the case of the labor arbiter./ To the same effect is the earlier ruling in (iatagon Labor 4ederation v. Gple. 3owever, in *hilippine Deterans "nvestment (evelopment !orporation v. !ourt of Appeals things took a different turn. "n that case, *3"D"(;! sold its controlling e#uity interests in *6" to *3"L 1!G', with a stipulation that *3"D"(;! shall hold *3"L 1!G' free and harmless against all liabilities of *6". *3"L 1!G' subse#uently formed the *anay 6ailways, "nc. to operate the railway assets ac#uired from *3"D"(;!. :orres, a prior creditor of *6" sued both *6" and *anay 6ailways, and the latter in turn filed a third% party complaints against *3"D"(;!. "n the judgment, *3"D"(;! was held liable with *6" on the claims of :orres.

*3"D"(;! contended that it could not be held liable for the debts of *6" since they are entirely distinct and separate corporations although the latter was its subsidiary& that the transfer of shares of stock of *6" to *3"L 1!G' did not divest *6" of its juridical personality or of its capacity to direct its own affairs and conduct its own business under the control of its own board of directors& and that by the same token it *6" was answerable for its own obligations, which cannot be passed on to *3"D"(;!. Aside from the fact that *3"D"(;! agreed expressly to hold *3"L 1!G' ?and also conse#uently the latter9s subsidiary *6" which filed the third%party complaint against *3"D"(;!@ free and harmless against claims arising before the transfer of *6", the !ourt held for the piercing of the corporate fiction on the following principle2 /$here it appears that two business enterprises are owned, conducted and controlled by the same parties, both law and e#uity will, when necessary to protect the rights of third persons, disregard the legal fiction that two corporations are distinct entities, and treat them as identical./ The factual basis used by the !ourt in order to enforce the above%#uoted doctrine is the finding of the trial court that /*3"D"(;!9s act of selling *6" to *3"L 1!G' shows that *3"D"(;! had complete control of *6"9s business./ *erhaps there were other considerations in the lower court9s findings showing that indeed *3"D"(;! had complete control over *6", but they certainly were not mentioned in the !ourt9s decision. "t is therefore unfortunate, and perhaps even tragic, that to allow a piercing under the alter ego doctrine, the !ourt would use the sale by a parent company of its shareholdings in a subsidiary to demonstrate complete control over the subsidiary. The result of such a doctrine would be that in cases of /e#uity transfers/ as discussed below, contrary to the ruling in ;dward ). <ell !ompany v. *acific 4arms, "nc., the applicable rule would be that the transferor is always liable for the corporate liabilities of the corporation whose shares are transferred in complete derogation of the main doctrine of separate juridical personality. Logically, a stockholder has always complete and almost absolute control over the shares he holds in a corporation. :ut that does not necessarily mean that he has complete control over the affairs and transactions of the corporation. *erhaps the !ourt forgot its own pronouncement that shares of stock in a corporation do not mean any interest in corporate properties as it held in tockholders of 4. 5uanzon and ons, "nc. v. 6egister of (eeds of 'anila, 'agsaysay%Labrador v. !ourt of Appeals, aw v. !ourt of Appeals, and ulo ng :ayan, "nc. v. Araneta, "nc. Transfer of :usiness ;nterprise % There is a species of alter ego cases which deserve separate discussions. Gften a business enterprise, apart from the juridical personality under which is operates, has a /separate being/ of its own. *roperly a business enterprise comprises more than just the properties of the business, but includes a /being/ that covers the employees, the goodwill, list of clientele and suppliers, etc., which give it a value separate and distinct from its owners or the juridical entity under which it operates. This is what is termed as the /economic unit/, /the enterprise/, /the going concern/, or the /financial unit/ recognized in other disciplines such as in ;conomics

and Accounting. "n Accounting, although a business enterprise is carried on in the form of a single proprietorship ?and therefore has no separate juridical personality@ it is considered and accounted for as a separate accounting unit apart from the other assets and businesses of the proprietor. "n fact, a business enterprise by itself is a /concern/ that has a separate economic or selling value from its owners9other assets& and that businessmen evaluating whether to purchase such business enterprise do not only look at the properties of the business but many other intangibles that really have no definite monetary value ?except when expressed as goodwill in Accounting@, such as the moral and technical competence of the employees and middle%management, the list of its valued clientele, location of the busibess, etc. And although, jurisprudence refuses to recognize a separate existence of the business enterprise apart from the juridical personality the tate grants in corporations and partnerships, such separate existence of the business enterprise does exist and is recognized in the business world. "n A.(. antos v. Das#uez, where a judgment in suit for workmen9s compensation which was filed against the corporate taxi cab company, despite the testimony of the claimant that he was employed not by the taxi cab company, but rather by the majority stockholder in the latter9s personal capacity, the !ourt nevertheless upheld the judgment against the taxi cab company observing that although in truth the majority stockholder operated the business under a sole proprietorship scheme, it was subse#uently transferred to the taxi cab company. "n an Teodoro (evelopment ;nterprises, "nc. v. ocial ecurity ystem although the business enterprise was originally held under a partnership scheme and latter the business was transferred to a corporation, the business enterprise was deemed to have been in operation for the re#uired two%year period as to come under the coverage of the Law. /Gn the strength of the foregoing facts, the ocial ecurity !ommission found that the dissolution of the partnership and the organization of the corporation were effected in such se#uence as to insure the smooth and orderly transfer of the business from the partnership to the corporation without interruption in the function of the business& that the entire business of the partnership, including the materials and e#uipment used in connection therewith, were transferred to the corporation ostensibly for a valuable consideration& and that even the name of the corporation was the same as the tradename of the partnership, and apparently their employees are also the same. All these, the !ommission said, coupled with the fact that four out of the five members of the partnership do not only own the controlling stock of the corporation but also hold positions having to do with the management and control of the corporation, indicates in a conclusive manner that there was merely a change in the juridical personality of the entity operating the business, so that it may be said that the substance of the juridical person owning and operating the business remain the same if its legal personality has changed./

Although there was no fraud intended, an Teodoro held that the possibility of fraud allowed the application of the piercing doctrine. To the same effect is Laguna Trans. !o., "nc. v. ocial ecurity ystem where the !ourt held that /7t8he corporation continued the same transportation business of the unregistered partnership, using the same lines and e#uipment. There was, in effect, only a change in the form of the organization of the entity engaged in the business of transportation of passengers./ "t further held that /$hile it is true that a corporation once formed is conferred a juridical personality separate and distinct from the persons composing it, it is but a legal fiction introduced for purposes of convenience and to subserve the ends of justice. The concept cannot be extended to a point beyond its reasons and policy, and when invoked in support of an end subversive of this policy, will be disregarded by the courts./ ;dward ). <ell !ompany v. *acific 4arms, "nc. held that generally, where one corporation sells or otherwise transfers all of its assets to another corporation, the latter is not liable for the debts and liabilities of the transferor, except2 ?+@ where the purchaser expressly or impliedly agrees to assume such debts& ?0@ where the transaction amounts to a consolidation or merger of the corporation& ?B@ where the purchasing corporation is merely a continuation of the selling corporation& and ?M@ where the transaction is entered into fraudulently in order to escape liability for such debts. *roperly evaluating the pronouncements in ;dward ). <ell insofar as they involve transfer of business concerns, the following rules apply to the enforceability of liabilities against the transferee regardless of the separate juridical personality of the transferor and transferee2 ?a@ "n a pure /assets only/ transfer, the transferee is not liable for the debts and liabilities of the transferor, except where the transferee expressly or impliedly agrees to assume such debts& ?b@ "n a transfer of the /business enterprise,/ the transferee is liable for the debts and liabilities of the transferor& and ?c@ "n an /e#uity transfer,/ the transferee is not liable for the debts and liabilities of the transferor, except where the transferee expressly or impliedly agrees to assume such debts. "t is logical in an /assets only/ transfer that the transferee would not be liable for the debts and liabilities of his transferor, for there is no privity of contract over the debt obligations between the transferee and the transferor9s creditors. "ndeed, modification of an obligation with the substitution of a new debtor, would necessarily re#uire the consent of the person who is sought to be substituted as the new debtor. The Law on !ontracts properly governs the transfer of liabilities in an /asset only./

"n a /business enterprise/ transfer, by jurisprudential decree, the transferee is liable for the debts and liabilities of his transferor. The purpose of the jurisprudential doctrine is to protect the creditors of the business by allowing them a remedy against the new controller or owner of the business. Gtherwise, creditors would be left holding the bag since they might not be able to recover from the transferor who has /disappeared with the loot,/ nor against the transferee who can claim that he is a purchaser in good faith and for value. The doctrine in /business enterprise/ transfers recognizes the reality in the business world that although no formal mortgage contract is executed, creditors and suppliers extend credit to the business because they see the business enterprise9s earning capacity and assets as a /security/ to the undertaking that they will be paid back. The doctrine therefore puts the burden on the shoulder of the person who is in the best position to protect himself, namely the transferee by obtaining certain guarantees and protection from his transferor. The doctrine also finds support in the :ulk ales Law which declares as void and fraudulent the bulk sale without applying the purchase proceeds to the pro%rata payment of bona fide claims of the creditors of the vendor. The /business enterprise/ transfer doctrine was also enunciated in Laguna Trans. !o., "nc. v. ocial ecurity ystem where the !ourt held2 /4inally, the weight of authority supports the view that where a corporation was formed by, and consisted of members of a partnership whose business and property was conveyed and transferred to the corporation for the purpose of continuing its business, in payment for which corporate stock was issued, such corporation is presumed to have assumed partnership debts, and is prima facie liable therefor ? towell vs. 5arden !ity <ews !orps. LK *.0d +0& !hicago melting = 6efining !orp. vs. ullivan, 0M. "1, App. LBI& :all vs. :ros., IB )une +,, <.A. upp. .,0.@ The reason for the rule is that the members of the partnership may be said to have simply put on a new coat, or taken on a corporate cloak, and the corporation is a mere continuation of the partnership. ?I 4letcher !yclopedia !orporations 7*erm. ;d.8 M-0%M++.@/ Gnly recently, in *epsi%!ola :ottling !o. v. <L6! the principle applicable to business enterprise transfer was applied. "nvolved in that case were the claims for reinstatement of dismissed officers against the then *epsi !ola (istributor ?*!(@, which had ceased to operate because of business losses, against an entirely different corporate entity, *epsi%!ola *roducts *hilippines, "nc. ?*!**"@, which subse#uently ac#uired the franchise to sell *epsi%!ola products in the *hilippines. "n holding the new corporation liable for the obligations of the old *!(, the !ourt held2 /*epsi%!ola (istributors of the *hilippines may have ceased business operations and *epsi%!ola *roducts *hilippines "nc. may be a new company but it does not necessarily follow that no one may now be held liable for illegal acts committed by the earlier firm. The complain was filed when *!( was still in existence. *epsi%!ola never stopped doing business in the *hilippines. The same soft drinks products sold in +,II when the complaint was initiated continue to be sold now. The sale of products, purchases of materials, payment of obligations, and other business acts did not stop at the time *!( bowed out and *!**" came into being. There is no evidence presented showing that

*!**", as the new entity or purchasing company is free from any liabilities incurred by the former corporation./ 7emphasis supplied8 *epsi%!ola :ottling !o.Ntherefore reiterated the doctrine that when the business enterprise is sold or transferred even to an entirely new entity, the transferee is deemed to assume liabilities of the business enterprise, and the burden of proof is with the transferee to show his non%liability. "n addition, the !ourt observed that in the surety bond put to cover the appeal, both *!( and *!**" bound themselves to answer the monetary awards of the private respondent in case of an adverse decision of the appeal, which clearly implied that *!**" as a result of the transfer of the franchise bound itself to answer for the liability of *!( to its employees. The logic of the /e#uity transfer/ finds support in the main doctrine of separate juridical personality, that by purchasing the shares in a corporation that owns a business, the stockholder does not by that reason alone become the owner directly of the business assets and does not therefore personally liable for the debts and liabilities of the business. "n *hilippine Deterans "nvestment (evelopment !orporation v. !ourt of Appeals, *3"D"(;! was held liable for the obligations of its subsidiary ?which its holdings it had sold to *3"L 1!G'@ mainly because it executed an agreement to hold *3"L 1!G' free and harmless against claims arising before the transfer. Thus in ;dward ). <ell, the creditor sought to make the transferee corporation liable for the corporate obligations on the ground that it was a mere alter ego of the corporation purchased /because 7the transferee corporation8 had purchased all or substantially all of the shares of stock, as well as the real and personal properties of the 7subject corporation8./ The !ourt held that since /there is neither proof nor allegation that appellee expressly or impliedly agreed to assume the debt 7of the subject corporation8 or that the sale of either the shares of stock or the assets of 7the subject corporation8 to the appellee has been entered into fraudulently, in order to escape liability for the debt of the 7subject corporation8,/ then whether it is an /assets only/ purchase or an /e#uity transfer,/ there is no basis to hold the transferee corporation liable for the debts and liabilities of the subject corporation. (isturbing (evelopments Adopting the 1mali (octrine.%% 1nder fraud cases, 1mali held that piercing the veil of corporate fiction is available only if it is sought to hold the officers and stockholders directly liable for a corporate debt or obligation. The doctrine in 1mali which is a fraud case seems to have been derived from the doctrine in (iatagon Labor 4ederation v. Gple where the !ourt struck down the holding of the (irector of Labor 6elations treating two corporations as single bargaining unit for /because the two companies are indubitably distinct entities with separate juridical personalities/ despite clear showing close relationship between them, which in many other cases decided by the !ourt would have been enough basis to pierce. $e can only surmise that such holding of refusal to pierce was because the issue involved was not money or damage claims, nor did it seek to hold any corporate officer or stockholder liable, but merely /whether two companies should be regarded as a single collective bargaining unit./

Lately, in the case of "ndophil Textile 'ill $orkers 1nion v. !alica, although it was shown that two corporations business are related, that some of the employees of the two corporations are interchanged, and that the physical plants, offices and facilities are situated in the same compound, were not considered bases to pierce the veil of corporate fiction in order to treat the two corporations as one bargaining unit. "n coming to this conclusion, the !ourt relied upon not only (iatagon Labor 4ederation, but also the doctrine in 1mali that /the legal corporate entity is disregarded only if it is sought to hold the officers and stockholders directly liable for a corporate debt or obligation./ 3owever, 1mali is a fraud case and the doctrine enunciated there finds rationale support because piercing in fraud cases is resorted to enforce liability on the persons employing fraud. :ut both (iatagon Labor 4ederation and "ndophil Textile 'ill are merely alter ego cases and the re#uirement that a monetary claim should be interposed should not have been made applicable, especially in the light of other alter ego cases decided by the !ourt applying the piercing doctrine even when the issue involved merely one on jurisdiction. "n ummary % 4rom all the foregoing there seem to be four ?M@ policy bases for piercing the veil of corporate fiction in alter ego cases2 4irstly, even when the controlling stockholder or managing officer intends consciously to do no evil, the use of the corporation as an alter ego, and in some cases as the private checkbook of the controlling stockholder, is in direct violation of the central principle in !orporation Law of treating the corporation as a separate juridical entity from its members and stockholders. !onse#uently, those whose acts and actuations directly violate this central doctrine, make themselves personally liable for having themselves cast away the protective characteristic of limited liability of the separate juridical personality. econdly, and more importantly, by not respecting the separate juridical personality of the corporation, others who deal with the corporation are not also expected to be bound by the separate juridical personality of the corporation, and may treat the interests of both the controlling stockholder or officer and the corporation as the same. This finds rational justification by the fact that the lack of respect for the separate affairs of the corporation, makes its difficult for the public to monitor exactly what properties and funds pertain to the corporation and those that pertain separately to the stockholders or officers& and that to allow such random interchange of assets and funds would probably lead to the defraudation of the creditors who deal with the corporation. Although no actual fraud is committed, unless the alter ego cases are upheld, then it is up to the dealing public to carefully keep tab or close accounting of what assets do pertain to the corporation. uch a situation would increase overseeing transaction costs to those who deal with corporate entities if the burden is placed on their shoulders, and in fact would make the corporate entity a less attractive medium to transact with. Therefore the application of the piercing doctrine to alter ego cases provides for a more efficient mechanism because it throws the burden to the person or persons who are in the best position to account properly and treat arms%length corporate properties and affairs. Thirdly, piercing in alter ego cases may prevail even when no monetary claims are sought to be enforced against the stockholders or officers of the corporation. <ote must be

taken of the disturbing developments in (iatagon Labor 4ederation and "ndophil Textile adopting the 1mali doctrine in fraud cases to alter ego cases. 4ourthly, when the underlying business enterprise does not really change and only the medium by which that business enterprise is changed, then there would be occasion to pierce the veil of corporate fiction to allow the business creditors to recover from whoever has actual control of the business enterprise. D". ;#uity !ases ;#uity cases applying the piercing doctrine are what are termed the /dumping ground/, where no fraud or alter ego circumstances can be culled by the !ourt to warrant piercing. The main features of e#uity cases is the need to render justice in the situation at hand or to brush aside merely technical defenses. Gften, e#uity cases of piercing appear in combination with other types of piercing. "n Telephone ;ngineering and ervice !o., "nc. v. $orkmen9s !ompensation !ommission the veil of corporate fiction was not allowed to be availed of, and piercing was allowed when the corporate fiction was made as a scheme to confuse the legitimate issues, such when the defense of separate juridical personality is interposed for the first time on appeal. "n ;milio !ano ;nterprises v. !ourt of "ndustrial 6elations where a suit reinstatement was filed against the corporate officers in such capacities, but which did include the corporation, the judgment debt was sought to be enforced against corporate assets. Although ;milio !ano ;nterprises is essentially an alter ego case, !ourt had occasion to apply the rationale for e#uity cases of piercing, thus2 for not the the

/x x x. Derily, the order against them 7the corporate officers8 is in effect against the corporation. <o benefit can be attained if this case were to be remanded to the court a #uo merely in response to a technical substitution of parties for such would only cause an unwarranted delay that would work to 3onorata9s prejudice. This is contrary to the spirit of the law which enjoins a speedy adjudication of labor cases disregarding as much as possible the technicalities of the procedure. $e, therefore, find unmeritorious the relief herein prayed for./ "n A.(. antos v. Das#uez a suit for workmen9s compensation was filed by taxi driver Das#uez against A( antos, "nc. Das#uez testified that Amador antos was his employer. A( antos "nc., contended that Amador is the one liable. The !ourt held that A( antos "nc., is liable. "ndeed, Amador was at one time, the sole owner and operator of the taxi business that employed Das#uez, which was later transferred to A( antos "nc. :ut such testimony should not be allowed to confuse the facts relating to employer% employee relationship, for when the veil of corporate fiction to /confuse legitimate issues,/ the same should be pierced. D"". The *iercing (octrine and the (ue *rocess !lause The final item that will be discussed is the procedural aspect of applying the piercing doctrine in conjunction with the due process clause. Gften, the piercing doctrine is

sought against the controlling stockholders or officers after a judgment debt against the corporation cannot be enforced because the corporation is found to be without sufficient assets. "t has been rightly argued in several cases, that to enforce a writ of execution to satisfy a judgment rendered against the corporation on the separate assets of the stockholders or officers would be in violation of the due process clause in cases where such stockholders or officers where not even summoned as parties to the case brought against the corporation. Thus in 'c!onnel v. !ourt of Appeals, when the judgment debt could not be satisfied from corporate assets, an entirely new case was filed by the judgment creditor against both the corporation and the controlling stockholders, and pleaded therein the application of the piercing doctrine to make the stockholders liable for the judgment debt of the corporation. "n ;milio !ano ;nterprises v. !ourt of "ndustrial 6elations a suit for reinstatement was filed against ;milio !ano and 6odolfo !ano in their capacities as officers of ;milio !ano ;nterprises. "nc., which did not include the corporation as defendant. The !ourt rendered judgment against the two, for reinstatement due to the fact that the stockholders belong to a single family. A writ of execution of the judgment debt was issued directed against the properties of the corporation, instead of those of the properties of the respondents officers. The !ourt denied the action to #uash the writ of execution on the ground that the judgment sought to be enforced was not rendered against the corporation which is a juridical personality separate and distinct from its officers. The !ourt held that a factor that should not be overlooked is that the officers where sued, not in their private capacities, but as officers of the corporation, and /7h8aving been sued officially their connection with the case must be deemed to be impressed with the representation of the corporation./ A corporation is a fiction, it can only act through its officers, so there would be no denial of due process in this case even if the corporation was not made a party defendant. "n <amarco v. Associated 4inance co., "nc. where corporate liability was sought to be enforced against the *resident who fraudulently entered into a contract in the name of the corporation, the piercing of the veil of corporate fiction was sought with the *resident being already made a defendant at the onset together with the corporation. "n )acinto v. !ourt of Appeals, it was held that the piercing doctrine may be applied by the courts even when the complaint does not seek its enforcement, so long as evidence is adduced during trial as the basis for its application can be had. "n other words, there must be evidential basis for application of the piercing doctrine during the trial on the merits. "n Arcilla v. !ourt of Appeals a judgment rendered against a person /in his capacity as *resident/ of the corporation was enforceable against the assets of such officer when the decision itself found that he merely used the corporation as his alter ego or as his business conduit.

Again, in the field of labor the doctrine takes a different twist when invoking the piercing doctrine to make stockholders and officers liable for corporate debts at the point of execution. This issue was raised in A.!. 6ansom Labor 1nion%!!L1 v. <ational Labor 6elations !ommission, where corporate officers were sought to be made personally liable for a judgment for backwages rendered against the corporation. "n allowing judgment to be executed against officers who were not parties to the case filed against the corporation, the !ourt relied upon the provisions of the Labor !ode that defined the liable /employer/ to /include any person acting in the interest of an employer, directly or indirectly./ The !ourt held2 /x x x ince 6A< G' is an artificial person, it must have an officer who can be presumed to be the employer, being the Fperson acting in the interest of ?the employer9 6A< G'. The corporation, only in the technical sense, is the employer. /The responsible officer of an employer corporation can be held personally, not to say even criminally, liable for a non%payment of back wages. That is the policy of the law. x x x ./ The reasoning on this issue in A.!. 6ansom still fails to answer how a party, even when he is indicated by statutory language to be responsible for an act, can be held liable when he has not even been given his day in court under the due process clause. The doctrine was reiterated in Dillanueva v. Adre. The A.!. 6ansom doctrine actually contradicted the earlier ruling in <ational Labor 6elations !ommission, where it was held that2 unio v.

/"t is basic that a corporation is invested by law with a personality separate and distinct from those of the persons composing it as well as from that of any other entity to which it may be related. 'ere 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 ground for disregarding the separate corporate personality./ 3owever, the later case of Lim v. <ational Labor 6elations !ommission clarified that the A.!. 6ansom doctrine applies only when the corporation no longer exists2 /The case of 6ansom v. <L6! is not in point because there the debtor corporation actually ceased operations after the decision of the !ourt of "ndustrial 6elations was promulgated against it, making it necessary to enforce it against its former president. weet Lines is still existing and able to satisfy the judgment in favor of the private respondent./ :ut even the broad application of the A.!. 6ansom doctrine was refused subse#uently unless fraud is shown on the part of the officer sought to be made personally liable. That is the reason why subse#uently (el 6osario v. <ational Labor 6elations !ommission refused to apply A.!. 6ansom pronouncement and denied enforcement of a writ of execution against the officers for an unsatisfied judgment against the corporation because it found that /7i8n the case before us, not only has there been a failure to establish fraud, but it has also not been shown that petitioner is the corporate office responsible for private respondent9s predicament./ "n other words, to warrant application of piercing to make a corporate officer or stockholder liable for the corporate

debts or obligations, evidence must be shown that such officer or stockholder was responsible for the corporate act, and that stage can only come during the hearing on the merits. 6ecently, (e 5uzman v. <ational Labor 6elations !ommission further clarified the A.!. 6ansom doctrine not to be applicable to all types of officers, such as the general manager, even if he is the highest ranking officer, when such officers is neither a stockholder or a member of the board of directors. "n $estern Agro "ndustrial !orporation v. !ourt of Appeals where the corporate officer was sued with the corporation to enforce a corporate obligation, the !ourt refused to apply the piercing doctrine to make the corporate officer liable for the corporate obligation since /7i8n this case there is no showing that 7the corporate officer8 was not authorized by the corporation to enter into purchase contracts x x x 7and8 7m8oreover, the respondent corporation has not shown any circumstances which would necessitate the piercing of the corporate veil so as to make 7the corporate officer8 personally liable for the obligations incurred by the petitioner./ Therefore, if in a clear case were a corporate officer or stockholder is made a party jointly with the corporation to enforce corporate debts and obligation, such corporate officer or stockholder cannot be made personally liable without evidence adduced to warrant the piercing such as fraud, then the more corporate officers and stockholders cannot be belatedly made personally liable for a corporate judgment debt at the point of execution for indeed the tribunal is at that point without further jurisdiction to receive evidence on the merits. This very issue was raised in *abalan v. <ational Labor 6elations !ommission where the corporate officers sought to be made personally liable for a judgment rendered against the corporation argued that no jurisdiction was ac#uired over them /as they have not been served with summons and thus they were deprived of due process./ "n addressing this issue, the !ourt held2 /The !ourt finds these grounds to be devoid of merit. As the record shows while originally it was *"4 which was impleaded as respondent before the labor arbiter, petitioners also appeared in their behalf through counsel. Thereafter when the supplemental position paper was filed by complainants, petitioners were impleaded as respondents to which they filed an opposition inasmuch as they filed their own supplemental position papers. They were therefore properly served with summons and they were not deprived of due process./ "n other words, when confronted with the issue of due process, the !ourt would consider it a legitimate and serious issue and would determine, as it did in *abalan, whether such constitutional guarantee has been violated. Lately, in ;*5 !onstruction !ompany, "nc. v. !ourt of Appeals it was reiterated that where it is not shown that the *resident of a corporation /had acted maliciously or in bad faith/ and there is no evidence adduce to show why he should be made liable with the corporation for the latter9s obligation, such officer may not be made personally liable for corporate contracts entered in his official capacity.

D""". 4inal Gbservations Gf the three ?B@ types of piercing cases, it would seem therefore that the most restricted one are the fraud cases since the !ourt has re#uired that allegations of fraud must clearly be proven to make a stockholder or officer liable for corporate debts and that piercing is available only when there is a claim for recovery against such stockholders or officers. The alter ego cases of the piercing doctrine tend to have wider leeway in their applications and even without intending to do malice or just by being practical in costing by taking shortcuts such as housing together under closely inter%related operations two or more corporate businesses, the controlling stockholders or officers may find themselves liable personally for corporate debts. The most unwieldy class are the e#uity cases, when often in a fit of laziness, the courts may just tend to pierce and not carefully go through the facts of the case to rely on other doctrines to do justice. 4ortunately, the e#uity cases often are resorted to as additional grounds ?supportive roles@ in fraud and alter ego cases& however, the tendency to abuse is there. :ut all three types of piercing have an underlying theme that often does not draw the proper attention to which it is entitled to2 "n all of the piercing cases discussed, the effect of piercing has always been to make the active or intervening stockholder or officer liable for corporate debts and obligations. Therefore, what is clear, especially for publicly% listed companies, is that the main doctrine of separate juridical personality, and all its ancillary attributes, including limited liability, remain firm and formidable to mere passive investors in a corporation. This just proves a point often pointed out in my lectures that the corporate entity is meant primarily to attract investors to place their money in the hands of professional managers ?a divorcement of ownership from control@ and that most corporate doctrines were intended for such a set%up. !lose supervision of one9s investment should be more compatible with other forms of media such as partnership and sole proprietorship. "n fact, the !orporation !ode has given a special type of vehicle for investors who wish to actively manage their investments2 the close corporations, which have been termed as incorporated partnership and for which intervening stockholders are made personally liable for corporate debts and obligations. %%%oGo%%%

The original version of the article first appeared in BK Ateneo L.). +, ?Dol. 0, june +,,B@. Act <o. +ML, passed by the then *hilippine !ommission, known as the /!orporation Law./ ection 0, Act <o. +ML,, and ection 0, :atas *ambansa :lg. 0L. :atas *ambansa :lg. 0L ?+,I-@. $hen studying !orporation Law, there is little direct consciousness that the doctrine of separate juridical personality also finds basis from Article MM of the !ivil !ode which recognizes as juridical persons /7c8orporations, partnerships and associations for private interests or purposes to which the law grants a juridical personality, separate and distinct from that of each shareholder, partner or member./ :allantine, ec. 0IK. . !6A BKB ?+,.0@. "bid, at BKL%BK.. .0 *hil. I,L ?+,B.@. "bid, at p. I,I. +I- !6A 0.. ?+,I,@. 'agsaysay%Labrador v. !ourt of Appeals, +I- !6A 0.., 0K+ 7+,I,8. 'agsaysay citing :allantine 0II%0I,& *ascual v. (el ?+,++@. +,L !6A KM- ?+,,+@. "bid, at pp. KMM%KML. K0 !6A BMK ?+,K.@. +KK !6A KI, ?+,I,@. The mere fact that an individual bound himself as surety for a corporations obligations does not vest the ;! exclusive jurisdiction over said individuals or over the latter9s person or property in a rehabilitation and receivership proceedings pending with the ;! over the !orporate entity ?Traders 6oyal :ank v. !ourt of Appeals, +KK !6A KII, K,0 7+,I,8@. +KK !6A KI,, K,0. +L0 !6A MIK ?+,IK@. "bid, at p. MI.. BLL ?+,K.@. ee also ulong :ayan, "nc. v. Araneta, "nc., K0 !6A BMK, BLM% anz Grozco, +, *hil. I0, I.

+,M !6A LMM ?+,,+@. "bid, at p. LL-, citing Traders 6oyal :ank v. !ourt of Appeals, +L0 7+,I,8 and !ruz v. (alisay, +L0 !6A MI0 7+,I,8. !6A MI0

+I. !6A IM+ ?+,,-@. 0 !6A .B0, .M- ?+,.+@ ee also *alay, "nc. v. !lave, +0M !6A .BI ?+,IB@& *abalan v. <ational Labor 6elations !ommission, +IM !6A M,L ?+,,-@. +I, !6A L0,, LMB ?+,,-@. "bid, at p. LMB. Also (iatagon Labor 4ederation v. Gple, +-+ !6A LBM ?+,I-@. *<: v. *hil <eg. Gil !o., M, *hil. ILK, ILB, and I.0 ?+,0K@. o common%place has the incantation been that even our own !ourt when it says the magic words does not even cite the case of 1nited tates v. 'ilwaukee 6efrigerator Transit !o., +M0 4ed. 0MK 7+,-L8@. +M0 4ed. 0MK ?+,-L@. at 0LL. +I, !6A L0, ?+,,-@. 1mali v. !ourt of Appeals, +I, !6A L0, ?+,,-@. KK *hil. M,. ?+,M.@. "bid, at pp. L-M%L-L. +-. *hil. +,, ?+,L,@. "bid, at p. LMB. 0++ !6A MK- ?+,,0@. +,0 !6A MIK, MI. ?+,IK@ >oppel ?*hilippines, "nc. v. Aatco, KK *hil. M,. ?+,M.@& Autivo ons 3ardware v. !ourt of Tax Appeals, + !6A +.- ?+,.+@& Liddell = co. v. !ollector of "nternal 6evenue, 0 !6A .B0 ?+,.+@& !ommissioner of "nternal 6evenue v. <orton and 3arrison, ++ !6A K+M ?+,LM@. Azcuna in his article /The (octrine of *iercing the Deil of !orporate 4iction2 A 6eview and Analysis of *hilippine upreme !ourt (ecision from $illets to 6amirez/ ?+I AT;<;G L.). Dol. ", p. ,@ groups them only into two2 ?+@ when the corporate entity is used to promote fraud, injustice, illegality of wrong& and ?0@ the corporate entity is a mere alter ego, business, conduit, branch or agency of a person, natural or another corporation. ?at p. BM@. 3owever, 1mali v. !ourt of Appeals, +I, !6A L0, ?+,,-@, has impliedly recognized three ?B@ groupings ?at p. LM0@. +0 !6A K-- ?+,.M@. "bid, at p. K-L. ,+ *hil. KI. ?+,L0@. 1nder Article +M,+ of the !ivil !ode, a purchase by an agent of the property of the principal is void.

"n :urnett !ommissioner v. !larke, 0IK 1 M+-, LB .!t. 0-K, KK L.;d. B,K, the 1nited tates upreme !ourt refused a taxpayer to use the piercing doctrine to gain a tax advantage. !larke indorsed his notes for a corporation of which he was majority stockholder. 3e sustained losses by virtue of such endorsement. uch losses cannot be deducted on his income tax returns, because first, it did not result from any operation of any trade or business regularly carried on by a taxpayer and, more importantly, because a corporation and its stockholders are generally to be treated as separate entities, and only under exceptional circumstances can the difference be disregarded. +I, !6A L0,, LMB ?+,,-@. ++ !6A K+M ?+,LM@. +, !6A ,.0 ?+,.K@. "bid, at p. ,.L. L !6A +-++ ?+,.0@. 0L !6A IML ?+,.I@. "bid, at pp. ILK%ILI. +0M !6A .BI ?+,IB@. "bid, at pp. .MI%.M,. "bid, at p. .M,. +IM !6A M,L ?+,,-@. "bid, at p. M,,. "bid, at p. L--. +0 !6A K-- ?+,.M@. "bid, at p. K-L. +I+ !6A K+, ?+,,-@. "bid, at p. K0,. +M0 !6A 0., ?+,I.@. +IK !6A KKK ?+,,-@. +II !6A K-, ?+,,-@. "bid, at p. K+I. +I, !6A K.K ?+,,-@. MM *hil. ..M ?+,0B@. The !ourt found that /There is no claim or pretense that there was any fraud or collusion between plaintiff and $illits, and it is very apparent that ;xhibit : was to the mutual interests of both parties./ % "bid, at p. .MB "bid, at p. .ML, #uoting from 1. . 5ypsum !o. vs. 'ackay $all *laster !o., +,, *ac., 0M,.

"bid, at p. .M+. ,B *hil. +.- ?+,LB@. ,M *hil. BK. ?+,LM@. + !6A +.- ?+,.+@. 0 !6A .B0 ?+,.+@. "bid, at p. .M+, citing 5regory v. 3elvering, 0,B 1. . M.L, K L.;d. L,., L,,, LL .!t. 0, !6A +,+ ?+,.,@. upreme !ourt Advanced (ecision, Gctober, +,LI issue& LL G.5. <o. BL, p. KBB+. 0+. !6A MK- 7+,,08. + !6A K00 ?+,.+@. "bid, at K0L. "bid, at K0.. "bid, at p. K0.. 0 !6A .B0 ?+,.+@. "bid, at p. .M-. KK *hil. M,K ?+,M.@. "bid, at pp. L-I%L-,. The subsidiary corporation bore the expenses of the parent company& used its own inventory to cover orders from the parent company& answered for the drafts of the parent company& had key officers residing in the 1nited tates& and employed simple booking entries for credits due from the parent company. +I. !6A IM+ ?+,,-@. +-+ !6A LBM ?+,I-@. +I+ !6A .., ?+,,-@. " am always frightened by upreme !ourt decisions that seek to oversimplify things, as )ustice !ruz enunciated in his opening statement in *hilippine Deterans "nvestment (evelopment !orporation2 /The concept of piercing the veil of corporate fiction is a mysti#ue to many people, especially the layman. but it is not as esoteric as all that as this case will demonstrate./ at p. .K-. "bid, at p. .KB, citing )abney v. :elmont !ountry !lub *roperties, "nc. 0K, *ac. I0,. "bid, at p. .KM. +L !6A M+L ?+,.L@. . !6A BKB ?+,.0@. +I- !6A 0.. ?+,I,@.

+,L !6A KM- ?+,,+@. K0 !6A BMK ?+,K.@. Tayag v. :enguet !onsolidated "nc., 0. !6A 0M0 ?+,.I@. "t rejected the genossenchaft theory of 4riedman that would recognize the corporate entity as /the reality of the group as a social and legal entity independent of state recognition and concession./ Ang *ue = !o. v. ec. of !ommerce and "ndustry, L !6A .ML ?+,.0@. The formation of a corporate entity or a partnership is not a matter of right, but rather of a privilege. 00 !6A ++LI ?+,.I@. I !6A ,. ?+,.B@. "bid, at pp. ,,%+--. +-K *hil. IBB ?+,.-@. "bid, at p. IBK. "bid, at p. IBK, citing +B Am.)ur. +.-. +L !6A M+L ?+,.L@. Act B,L0, as amended by 6ep. Act <o. +++. +-K *hil. IBB ?+,.-@. "bid, at pp. IBI%IB,. 0+- !6A 0KK ?+,,0@. +I+ !6A .., ?+,,-@. +I, !6A L0,, LM0 ?+,,@. +-+ !6A LBL ?+,I-@. The employees were formerly employees of one of the corporations transferred to the other& even after the transfer, the affected employees continued to use the pay envelopes and identification cards of their former employer& the two companies had common management and represented by the same lawyers. +-+ !6A LBL. 0-L !6A .,K ?+,,0@. +-M !6A BLM ?+,I+@. +B !6A 0,+ ?+,.L@. "bid, at p. 0,B. 00 !6A ++LI ?+,.I@. + !6A K0B ?+,.+@.F +B !6A 0,+ ?+,.L@. "bid, at p. 0,0.

+, !6A ,.0 ?+,.K@. +,I !6A 0++ ?+,,+@. 0+L !6A +0- ?+,,0@. +M0 !6A 0., ?+,I.@. "bid, at p. 0KB, citing Article 0+0?c@ of the Labor !ode. "bid, at pp. 0KB%0KM. The A.!. 6ansom doctrine was reiterated in 5udez v. <L6!, +IB !6A .MM 7+,,-8, 'aglutac v. <L6!, +I, !6A K.K 7+,,-8, and !hua v. <L6!, +I0 !6A BLB 7+,,-8. +K0 !6A IK. ?+,I,@. +0K !6A B,- ?+,IM@. +K+ !6A B0I ?+,I,@. +IK !6A KKK ?+,,-@. "bid, at p. KI0. 0++ !6A K0B ?+,,0@. +II !6A K-, ?+,,-@. "bid, at p. K+I. +IM !6A M,L ?+,,-@. "bid, at p. M,I. "bid, at pp. M,I%M,,. 0+- !6A 0B- ?+,,0@. ee ec. +--, !orporation !ode.