Piercing the Veil of corporate fiction

BUENAFLOR C. UMALI, MAURICIA M. VDA. DE CASTILLO, VICTORIA M. CASTILLO,

BERTILLA C. RADA, MARIETTA C. ABAEZ, LEOVINA C. JALBUENA and SANTIAGO M.
RIVERA vs. COURT OF APPEALS, BORMAHECO, INC. and PHILIPPINE MACHINERY
PARTS MANUFACTURING CO., INC.
FACTS:
Petitioner Santiago Rivera is the nephew of petitioner Mauricia Meer Vda. de Castillo. The
Castillo famil are the owners of a parcel of land located in !ucena Cit which was given as
securit for a loan from the "evelopment #an$ of the Philippines. For their failure to pa the
amorti%ation& foreclosure of the said propert was a'out to 'e initiated. This pro'lem was made
$nown to Santiago Rivera& who proposed to them the conversion into su'division of the four ()*
parcels of land ad+acent to the mortgaged propert to raise the necessar fund. The ,dea was
accepted ' the Castillo famil and to carr out the pro+ect& a Memorandum of Agreement was
e-ecuted ' and 'etween Slo'ec Realt and "evelopment& ,nc.& represented ' its President
Santiago Rivera and the Castillo famil. ,n this agreement& Santiago Rivera o'liged himself to
pa the Castillo famil the sum of P./0 immediatel after the e-ecution of the agreement and to
pa the additional amount of P)//T after the propert has 'een converted into a su'division.
Rivera& armed with the agreement& approached Mr. Modesto Cervantes& president of defendant
#ormaheco& and proposed to purchase from #ormaheco two (1* tractors& Sales Agreement was
e-ecuted on "ec. 12& 34./.
#ormaheco& ,nc. and Slo'ec Realt and "evelopment& ,nc. e-ecuted a Sales Agreement over
one unit of Caterpillar Tractor "5.. ,n the contract& the price was P16/&///.// of which
P7/&///.// was to constitute a down pament& and the 'alance of P32/&///.// paa'le in
eighteen monthl installments. 8n the same date& Slo'ec& through Rivera& e-ecuted in favor of
#ormaheco a Chattel Mortgage over the said e9uipment as securit for the pament of the
aforesaid 'alance of P32/&///.//. As further securit of the aforementioned unpaid 'alance&
Slo'ec o'tained from ,nsurance Corporation of the Phil. a Suret #ond& with ,CP as suret and
Slo'ec as principal& in favor of #ormaheco. The suret 'ond was in turn secured ' an
Agreement of Counter5:uarant with Real ;state Mortgage e-ecuted ' Rivera as president of
Slo'ec and Castillo famil& as mortgagors and ,CP as mortgagee. ,n this agreement& ,CP
guaranteed the o'ligation of Slo'ec with #ormaheco in the amount of P32/&///.//. ,n giving the
'ond& ,CP re9uired that the Castillos mortgage to them the properties in 9uestion& namel& four
parcels of land in the name of the aforementioned mortgagors.
Meanwhile& for violation of the terms and conditions of the Counter5:uarant Agreement& the
properties of the Castillos were foreclosed ' ,CP as the highest 'idder& a Certificate of Sale
was issued ' the Provincial Sheriff of !ucena Cit and Transfer Certificates of Title over the
su'+ect parcels of land were issued ' the Register of "eeds of !ucena Cit in favor of ,CP. The
mortgagors had one (3* ear from the date of the registration of the certificate of sale& to redeem
the propert& 'ut the failed to do so. Conse9uentl& ,CP consolidated its ownership over the
su'+ect parcels of land through the re9uisite affidavit of consolidation of ownership. Pursuant
thereto& a "eed of Sale of Real ;state covering the su'+ect properties was issued in favor of
,CP.
Su'se9uentl& ,CP sold to Phil. Machiner Parts Manufacturing Co. (PM Parts* the four ()*
parcels of land and ' virtue of said conveance& PM Parts transferred unto itself the titles over
the lots in dispute.
Thereafter& PM Parts& through its President& Mr. Modesto Cervantes& sent a letter addressed to
petitioner Mrs. Mauricia Meer Castillo re9uesting her and her children to vacate the su'+ect
propert& who (Mrs. Castillo* in turn sent her repl e-pressing her refusal to compl with his
demands.
The heirs of the late Felipe Castillo& petitioner #uenaflor M. Castillo <mali as the appointed
administratri- of the properties filed an action for annulment of title 'efore the then CF, of
=ue%on. Thereafter& the filed an Amended Complaint. Then petitioners filed their Second
Amended Complaint& impleading Santiago M. Rivera as a part plaintiff. The contended that all
the aforementioned transactions starting with the Agreement of Counter5:uarant with Real
;state Mortgage& Certificate of Sale and the "eeds of Authorit to Sell& Sale and the Affidavit of
Consolidation of 8wnership and the "eed of Sale are void for 'eing entered into in fraud and
without the consent and approval of the CF, of =ue%on& 'efore whom the administration
proceedings has 'een pending. Petitioners pra that the ) parcels of land 'e declared as owned
' the estate of the late Felipe Castillo and that all Transfer Certificates of Title& as well as those
appearing as encum'rances at the 'ac$ of the certificates of title mentioned 'e declared as a
nullit.
,n their amended answer& the defendants (r
espondents herein* controverted the complaint and alleged& that the complaint did not state
facts sufficient to state a cause of action against defendants> that petitioners are not entitled to
the reliefs demanded> that the are estopped or precluded from asserting the matters set forth in
the Complaint> that the are guilt of laches in not asserting their alleged right in due time> that
respondent PM Parts is an innocent purchaser for value and relied on the face of the title 'efore
it 'ought the su'+ect propert.
The trial court rendered +udgment in favor of petitioners and declared all said transactions as
null and void for 'eing fictitious& spurious and without consideration. The CA reversed said
decision& hence this petition.
,SS<;:
?@A the doctrine of piercing the veil of corporate fiction is not applica'le in this case.
B;!":
Ao. <nder the doctrine of piercing the veil of corporate entit& when valid grounds therefore
e-ist& the legal fiction that a corporation is an entit with a +uridical personalit separate and
distinct from its mem'ers or stoc$holders ma 'e disregarded. ,n such cases& the corporation
will 'e considered as a mere association of persons. The mem'ers or stoc$holders of the
corporation will 'e considered as the corporation& that is& lia'ilit will attach directl to the
officers and stoc$holders. The doctrine applies: (3*when the corporate fiction is used to defeat
pu'lic convenience& +ustif wrong& protect fraud& or defend crime> (1* when it is made as a shield
to confuse the legitimate issues> (6*where a corporation is the mere alter ego or 'usiness
conduit of a person> ()*where the corporation is so organi%ed and controlled and its affairs are
so conducted as to ma$e it merel an instrumentalit& agenc& conduit or ad+unct of another
corporation.
,n the case at 'ar& petitioners see$ to pierce the VC13 8f corporate entit of #ormaheco& ,CP
and PM Parts& alleging that these corporations emploed fraud in causing the foreclosure and
su'se9uent sale of the real properties 'elonging to petitioners. ?hile we do not discount the
possi'ilit of the e-istence of fraud in the foreclosure proceeding& neither are we inclined to
appl the doctrine invo$ed ' petitioners in granting the relief sought. ,t is our considered
opinion that piercing the veil of corporate entit is not the proper remed in order that the
foreclosure proceeding ma 'e declared a nullit.
,n the first place& the legal corporate entit is disregarded onl if it is sought to hold the officers
and stoc$holders directl lia'le for a corporate de't or o'ligation. ,n the instant case& petitioners
do not see$ to impose a claim against the individual mem'ers of the three corporations
involved> on the contrar& it is these corporations which desire to enforce an alleged right
against petitioners. Assuming that petitioners were indeed defrauded ' private respondents in
the foreclosure of the mortgaged properties& this fact alone is not& under the circumstances&
sufficient to +ustif the piercing of the corporate fiction& since petitioners do not intend to hold the
officers and@or mem'ers of respondent corporations personall lia'le therefor. Petitioners are
merel see$ing the declaration of the nullit of the foreclosure sale& which relief ma 'e o'tained
without having to disregard the aforesaid corporate fiction attaching to respondent corporations.
Secondl& petitioners failed to esta'lish ' clear and convincing evidence that private
respondents were purposel formed and operated& and thereafter transacted with petitioners&
with the sole intention of defrauding the latter.
The mere fact& therefore& that the 'usinesses of two or more corporations are interrelated is not
a +ustification for disregarding their separate personalities& a'sent sufficient showing that the
corporate entit was purposel used as a shield to defraud creditors and third persons of their
rights.
!""#$ v Ya%&!
(The su'sidiar was so controlled ' the parent that its separate identit was hardl discerni'le&
and 'ecame a mere alter ego of the parent and was used to evade ta-es*
0oppel ,ndustrial and Car Compan is a corporation organi%ed and e-isting under the laws of
the State of Pennslvania. The are not licensed to do 'usiness in the RP& 'ut do 'usiness
through 0oppel Phils& ,nc& owning 447 out of 3/// shares of stoc$ of the said compan (the
remaining 7 were owned ' the 7 officers of 0oppel Phils*. 0oppel Phils ca'led 0oppel
,ndustrial for 9uotation desired ' a prospective client. 0oppel Phils however 9uoted a higher
price for the 'uer than that 9uoted ' 0oppel ,ndustrial. 0oppel Phils then ca'led to ship the
merchandise to Manila. 0oppel Phils received a Dage of the profits reali%ed or its share of the
losses on the transactions. 0oppel also returned a sum allotted as pament of commercial
'ro$erEs ta- of )D.0oppel ,ndustrial demanded from 0oppel Phils the sum of PC)&311.73 as
merchantEs sales ta- of 3 FD of the share of 0oppel Phils in the profits. Beld: The Court said
that the virtual control of the shareholdings of a corporation would lead to certain legal
conclusions. ,t could not overloo$ the fact that in the practical wor$ing of corporate organi%ations
of the class to which the two entities 'elonged& the holder or holders of the controlling part of the
capital stoc$ of the corporation& particularl where the control is determined ' the virtual
ownership of the totalit of the shares& dominate not onl the selection of the 'oard of directors
'ut more often than not& also the action of that 'oard. ,t held that appling this to the case& it
cannot 'e conceived how the 0oppel Phils could effectivel go against the policies& decisions&
and desires of the American corporationG Aeither can it 'e conceived how the Phil corporation
could avoid following the directions of the American corporation in ever other transaction where
the had 'oth to intervene& in view of the fact that the American corporation held 44.7D of the
capital stoc$ of the Phil corporationG ,n so far as the sales are concerned& 0oppel Phils and
0oppel ,ndustrial are for all intents and purposes one and the same& and the former is a mere
'ranch& su'sidiar& or agenc of the latter. The ff are facts which led to the Court to conclude
the a'ove:
H share in the profits of 0oppel Phils was left to the sole& un'ridled control of 0oppel ,ndustrial
H Shares of stoc$ of 0oppel Phils are all owned ' 0oppel ,ndustrial(overwhelming ma+orit*
H 0oppel Phils acted as agent and representative of 0oppel ,ndustrial
H 0oppel Phils alone 'ore the incidental e-penses for transactions& such as ca'le e-penses
H 0oppel Phils was full empowered to instruct 'an$s it deals with& if purchasers were not
a'le to pa the 'an$ drafts to the 'an$ as pament for the purchases
H 0oppel Phils ma$es good an deficiencies ' deliveries from its own stoc$ the application of
the piercing doctrine is not a contravention of the principle that the corporate personalit of a
corporation cannot 'e collaterall attac$ed. ?hen the piercing doctrine is applied against a
corporation in a particular case& the court does not den legal personalitG for an and all
purposes. The application of the piercing doctrine is therefore within the am'it of the principle of
res +udicata that 'inds onl the parties to the case and onl to the matters actuall resolved
therein.
H :R: separate personalit
H ;-ception: cases where veil ma 'e pierced
o There was a violation of rights or in+ur in all these cases where veil was pierced
o ;lements of ownership& control& mgt in the corporate entit
,nevita'le that these will e-ist
All elements have to 'e satisfied so the corporate veil can 'e pierced
?hat determines piercea'ilitI
Motive@intention
!ia'ilit arising
,n+ur or damage or loss
H ;state planning:
o Ao impediment to use corporate as vehicle for estate planning
o Corporation can 'e put up ' a single person
o Aothing prevents an individual from funding a corporation
o To meet re9uirements of code& assign nominal shares to persons
o ,f it is mone& can 'e used to ac9uire assets> still corporate5owned
o ;ven a 44.4D owner cannot distri'ute the propert& onl the shares
H Cease: ideal& 'ut there was a dispute
H Marvel had no compulsor heirs
H "elpher ruling on transfer is o'iter
H Just defer: use corporate as a vehicle to distri'ute what appears to 'e the estate
8 #ut: ou still have to distri'ute the shares (dispose or donate*
8 Mechanism to ensure that once ou die& corporation is dissolved
8therwise: Cease case
;-it mechanism for those who want out
RICARDO TANTONGCO, "#%'%'!n#(,
)v#(s*s)
AISAHAN NG MGA MANGGAGA+A SA LA CAMPAN ,M- AND THE HONORABLE
COURT OF INDUSTRIAL RELATIONS, (#s"!nd#n%s
FACTS:
Tantongco was cited in contempt in relation to the orders issued ' the C,R5 the !a Campana
Starch and Coffee Factor or its manager or the person who has charge of the management&
and the administrator of the ;state of Ramon Tantongco are here' ordered to compl with said
order& within five das from receipt hereof& particularl the following& to:
(a* To reinstate the persons named in the said 8rder of Fe'ruar 32& 347.>
('* To deposit the amount of PC7&76)./3 with this Court.
?ith respect to possi'le 'ac$ wages from August 12& 347. as mentioned in the petition for
contempt of August 6/& 347.& the same shall first 'e determined.
The facts in this case ma 'e 'riefl narrated thus: Sometime in June& 3473& mem'ers of the
0aisahan ng mga Manggagawa sa !a Campana& a la'or union to which were affiliated wor$ers
in the !a Campana Starch Factor and !a Campana Coffee Factor& two separate entities 'ut
under the one management& presented demands for higher wages& and more privileges and
'enefits in connection with their wor$. ?hen the management failed and refused to grant the
demands& the "epartment of !a'or intervened> 'ut failing to settle the controvers& it certified
the dispute to the Court of ,ndustrial Relations on Jul 3.& 3473& where it was doc$eted as Case
Ao. 72)KV. 8n the theor that the la'orers presenting the demands were onl the ones wor$ing
in the coffee factor& said compan filed through the management a motion to dismiss claiming
that inasmuch as there were onl 3) of them in said factor& the Court of ,ndustrial Relations
had no +urisdiction to entertain and decide the case. The motion was denied ' the Court of
,ndustrial Relations& which said:
There was onl management for the 'usiness of gawgaw and coffee with whom the la'orers are
dealing regarding their wor$. Bence& the filing of action against the !a Campana Starch and
Coffee Factor is proper and +ustified.
Petitioner contends on the other hand5o'viousl do not 9uestion the fact that the num'er of
emploees of the !a Campana :augau Pac$ing involved in the case is more than the
+urisdictional num'er (63* re9uired ' law& contend that the industrial court has no +urisdiction to
tr case against !a Campana Coffee Factor Co. ,nc. 'ecause the latter has allegedl onl 3)
la'orers and onl five of these are mem'ers of respondent 0aisahan. This contention loses
force when it is noted that& as found ' the industrial court H and this finding is conclusive upon
us H !a Campana :augau Pac$ing and !a Campana Coffee Factor Co. ,nc.& are operating
under one single management& that is& one 'usiness though with two trade names. True& the
coffee factor is a corporation & and& ' legal fiction& an entit e-isting separate and part from
the persons composing it& that is& Tan Tong and his famil. #ut is settled this fiction of law&
which has 'een introduced as a matter of convenience and to su'serve the ends of +ustice
cannot 'e invo$e to further an end su'versive of that purpose.
,SS<;: ?hether or not the court is correct in piercing the veil of corporate fiction of !a
Campana Co despite the death of Tantongco.
R<!,A:: L;S5 we Mpierced the veil of corporate e-istenceM& and held that the !a Campana
Starch and Coffee Factor and its owner& Ramon Tantongco& were one> so that with the death of
Ramon& the !a Campana entities ceased to e-ist& resulting in the loss of +urisdiction of the C,R
to enforce its order against said entities. The reason we applied the so5called Mpiercing the veil
of corporate e-istenceM in :.R. Ao. !57C.. was to avoid the technicalit therein advanced in
order to defeat the +urisdiction of the C,R. ?e there found that although there were ostensi'l
two separate companies or entities& the were managed ' the same person or persons and the
wor$ers in 'oth were used interchangea'l so that in order to determine whether or not the C,R
had +urisdiction& the num'er of wor$ers in 'oth entitles& not in onl one& was to 'e considered.
Bowever& we still 'elieve that although the famil of Ramon Tantongco was practicall the
owner of 'oth the coffee factor and the starch factor& nevertheless these entities are separate
from the personalit of Ramon. The coffee factor is a stoc$ corporation and the shares are
owned not onl ' Ramon 'ut also ' others& such as petitioner Ricardo who not onl is a
stoc$holder and director and treasurer 'ut also the management of the same Furthermore&
petitioner is now estopped from claiming that the two entities in 9uestion and Ramon are one.
Thus in Anne- 65C,R (par. 3 thereof* which is a complaint for in+unction filed ' !a Campana
Food Products& et al and !a Campana Starch Pac$ing against the consolidated !a'or
8rgani%ation of the Philippines& in civil Case Ao. P517)21 in the Court of First ,nstance of Ri%al&
petitioner admitted the e-istence and operation of said entities> in Anne- )HC,R where
petitioner appeared as :eneral Manager representing the two entities in its agreement with the
!a Campana ?or$ers <nion to resolve the dispute 'etween the two entities and the la'orers in
case Aos. 3/.15V and 36.35<!P& the e-istence of the two entities appears to have 'een
admitted> and in Anne- 75A5C,R& an answer to the complaint of !a Campana ?or$ers <nion in
case Ao. 3).35<!P (Anne- 75C,R*& petitioner admitted the allegation that said two factories
were in e-istence and doing 'usiness with petitioner as manager of the same.
ROBLEDO vs. NLRC ,R#&!.n'%'!n and d's(#.a(d !/ &!("!(a%#n#ss0 P'#(&'n. %1# v#'$ !/
&!("!(a%# /'&%'!n-
234 SCRA 52, 6778-
FACTS:
The #AS;C corporation was organi%ed to 'e engaged in operating securit agenc& having as
one of its incorporators& #acani& who also had at that time a securit agenc operated as a
single proprietorship. !ater& #acani closed down his operations and terminated his emploees.
Bis terminated emploees sought to hold that #AS;C corporation lia'le for unpaid overtime and
legal holida pas& contending that #acani intentionall closed his operations to allow e-pansion
of the 'usiness through #AS;C. The contended that the #acani famil merel continued the
operation of the 'usiness ' creating #AS;C in order to avoid the o'ligations of the former&
contending that #acani 'ecame an incorporator of #AS;C together with his wife and daughter.
,SS<;:
?hether or not #acani intentionall closed his operation to allow e-pansion of the 'usiness '
creating #AS;C and to avoid o'ligations of his former compan.
B;!":
,t would ma$e the successor enterprise lia'le for de'ts of the previous enterprise on the 'asis of
piercing doctrine scenario.
The doctrine of piercing the veil of corporate entit is used whenever a court finds that the
corporate fiction is 'eing used to defeat pu'lic convenience& +ustif wrong& protect fraud& or
defend crime& or to confuse legitimate issues& or that a corporation is a mere alter ego or
'usiness conduit of a person or where the corporation is so organi%ed and controlled and its
affairs are so conducted as to ma$e it merel as an instrumentalit& agenc& conduit or ad+unct
of another corporation. The Court refused to ma$e #AS;C lia'le for the claims of the terminated
emploees since the facts showed that #AS;C alread e-isted prior to closure of #acani of his
operations> that #acani was merel one of five incorporators with the lease num'er of shares in
#AS;C> and there was no showing that the assets of the single proprietorship were even
transferred to #AS;C.
A.) Fraud cases
GREGORIO ARANETA, INC. V TUAZON
:.R. Ao. !5122C& 11 A<:<ST 3471
FACTS: "efendant Pa% Tu%aon de Paterno is the registered owner of appro-imatel
)/&./6 s9m. Parcel of land situated in Sta Mesa& Manila. Most of the lots were occupied '
lessees who had contract of lease whish were to e-pire on 63 "ecem'er 3476 with provision of
right of first refusal. ,n 34)/ and 34)3& Pa% Tua%on o'tained several loans from Jose Vidal and
was secured ' the lot in 9uestion. ,n 34)6& defendant decided to sell the entire propert to
plaintiff :regorio Araneta ,nc. the controvers arose when plaintiff corporation filed a complaint
to compel defendant Tua%on to deliver to the plaintiff a clear title of the lots free from all lien and
encum'rances which defendant Tua%on failed to compl 'ecause the mortgage she e-ecuted in
favor of Vidal is still annotated in the title. "efendant in her defense claims that the sale
'etween her and plaintiff corporation is not valid on the ground that Jose Araneta was her agent
and at the same time the President of plaintiff corporation.
,SS<;: ?8A Jose Araneta is an agent of defendant Tua%on and ?8A there was a valid
sale 'etween defendant and plaintiff corporation.
R<!,A:: The Court rules that corporate fiction will not 'e disregarded 'ecause the
corporate entit was not used to perpetuate fraud nor circumvent the law and the disregard of
the technicalit would pave the wa for the evasion of a legitimate and 'inding commitment&
especiall since defendant was full aware of the position of Jose Araneta in the corporation at
the time of the sale.
Jose Araneta was not an agent within the meaning as provided for ' Article
3)74 of the Civil Code. Be was nothing more than a go 'etween or middleman 'etween the
defendant and the purchaser& 'ringing them together to ma$e the contract themselves.
The rule that the piercing doctrine cannot 'e applied in favor of a part who was
not a NvictimO of an alleged fraud committed& 'eing full aware of the circumstances that are
'eing ventilated to show fraud.
G(#.!('! Pa$a&'! vs F#$9 T(ans"!(%a%'!n
Facts: Alfredo Carillo was hired ' the defendant corp. To 'e a driver of ac5.2. owned and
operated ' defendant corp. 8n "ecem'er 1)& 3471& Carillo run over Mario Palacio (the son of
herein plaintiff*. :regorio Palacio suffered moral damages 'ecause of the incident& according to
him he used to earn more on his welding 'usiness 'ut 'ecause of the incident he was forced to
loo$ upon his son in the hospital and he was forced to sell his e9uipments to support the
hospital e-penses. 8n the other hand& the Fel Transportation alleged that the do not own the
AC5.2. at the time of the incident happened& it was owned ' ,sa'elo Calingasan and that the
claim was alread 'arred 'ecause there was alread a +udgment on the criminal case. Plaintiff
:regorio Palacio alleged that Calingasan was the president of the Fel Transportation Compan
together with other officers which is his wife and son& and that he is onl hiding under the name
of Fel Transporation Compan.
,ssue:
?hether or not piercing the veil of corporate fiction ma 'e used in the instant case in
order to determine if Calingasan is su'sidiar lia'le.
Beld:
The Court agrees with this contention of the plaintiffs. ,sa'elo Calingasan and defendant
Fel Transportation ma 'e regarded as one and the same person. ,t is evident that ,sa'elo
CalingasanPs main purpose in forming the corporation was to evade his su'sidiar civil lia'ilit3
resulting from the conviction of his driver& Alfredo Carillo. This conclusion is 'orne out ' the
fact that the incorporators of the Fel Transportation are ,sa'elo Calingasan& his wife& his son&
"r. Calingasan& and his two daughters. ?e 'elieve that this is one case where the defendant
corporation should not 'e heard to sa that it has a personalit separate and distinct from its
mem'ers when to allow it to do so would 'e to sanction the use of the fiction of corporate entit
as a shield to further an end su'versive of +ustice. (!a Campana Coffee Factor& et al. v.
0aisahan ng mga Manggagawa& etc.& et al.& :.R. Ao. !57C..& Ma 17& 3476* Furthermore& the
failure of the defendant corporation to prove that it has other propert than the +eep (AC5C2.*
strengthens the conviction that its formation was for the purpose a'ove indicated.
And while it is true that ,sa'elo Calingasan is not a part in this case& et& is held in the case of
Alonso v. Villamor& 3C Phil. 637& this Court can su'stitute him in place of the defendant
corporation as to the real part in interest. This is so in order to avoid multiplicit of suits and
there' save the parties unnecessar e-penses and dela. (Sec. 1& Rule 3.& Rules of Court>
Cuugan v. "i%on. .4 Phil. 2/> =uison v. Salud& 31 Phil. 3/4.*
,ssue: ?8A there is evasion of lawful o'ligations that warrants the piercing of the corporate
fiction
Beld: es. The owner of the +eepne and the defendant compan ma 'e regarded as one and
the same person. The incorporatorEs main purpose in forming the corporation fel transportation
compan was to evade his su'sidiar civil lia'ilit resulting from the conviction of his driver. This
conclusion is 'orne out ' the fact that the incorporators of said compan are the +eepnes
owner and his wife& son and 1 daughters. The court also too$ into consideration as part of the
attempt to do fraud that the onl propert of the corpo was the +eep owned ' the main SB
involved in the accident.
The defendants and its president should 'e held su'sidiaril lia'le.
?here the main purpose in forming the corpo was to evade ones su'sidiar lia'ilit for
damages in a criminal case. The corpo cannot claim that it has a personalit separate and
distinct from its mem'ers 'ec. To allow it to do so would 'e to sanction the use of the fiction of
corporate entit as a shield to further end su'versive +ustice
Pa$a9 In&. and A$:#(% Ons%!%% vs C$av# ,P(#s. EA, NHA-
Facts: Petitioner Pala ,nc. through its President Al'ert 8nstott e-ecuted a contract to sell of a
parcel of land in favor of private respondent Aa%ario "umpit. Their contract provided for
automatic e-tra+udicial rescission upon default in pament of an monthl installment after the
lapse of the 3 month grace period& w@o need of notice and with forfeiture of all installments paid.
Respondent defaulted in pament and so when petitioner Pala ,nc. rescinded their contract
and resold the su'+ect lot.
ABA found the rescission void in the a'sence of either +udicial or notarial demand. ,t
ordered Pala ,nc. and 8nstott to +ointl and severall refund the amount paid ' private
respondents. The 8ffice of the Pres. affirmed the said decision.
,ssue: ?@A petitioners were +ustified in cancelling the contract to sell w@o prior notice or demand
upon respondent.
Beld: SC ruled the rescission of the contract was ineffective and inoperative for lac$ of notice of
resolution. The law provides that +udicial action for the rescission of a contract is not necessar
where the contract provides that it ma 'e revo$ed and cancelled for violation of an of its terms
and conditions however the act of a part in treating a contract as cancelled should 'e made
$now to the other.
,t further held that 8nstott cannot 'e held +ointl and severall lia'le with Pala ,nc for the
refund of the amount paid ' private respondent since no sufficient proof e-ists that 8nstott
used the corporation to defraud private respondent. 8nstott cannot 'e made personall lia'le
+ust 'ecause he appears to 'e the controlling stoc$holder. Mere ownership ' a single
stoc$holder or ' another corporation is not of itself sufficient ground for disregarding the
separate corporate personalit
,ssue: ?8A the doctrine of piercing the veil of corporate fiction is applica'le
Beld. A8. There is no 'adges of fraud on petitionerEs part. <nless sufficient proof e-ist on
record that an officer (president and SB* has used the corpo to defraud respondent& he cannot
'e made personall lia'le +ust 'eacause he appears to 'e the controlling SB. Mere ownership
' a single SB or ' another corpo of all or nearl all of the capital stoc$ of a corpo is not of
itself sufficient ground for disregarding the separate corporate personalit
PABALAN vs. NLRC
:.R. Ao. 242.4
April 1/& 344/
FACTS: ;ight5four (2)* wor$ers of the Philippine ,nter5Fashion& ,nc. (P,F* filed a
complaint against the latter for illegal transfer simultaneous with illegal dismissal without
+ustifia'le cause and in violation of the provision of the !a'or Code on securit of tenure as well
as the provisions of #atas Pam'ansa #lg. 36/. After conducting the hearings and su'mitting all
the necessar pleadings& the la'or ar'iter ordered the Philippine ,nter5Fashion and its officers
Mr. Jaime Pa'alan and Mr. ;duardo !agdameo to reinstate the wor$ers to their former or
e9uivalent position without loss of seniorit rights and privileges and pa& +ointl and severall&
their 'ac$ wages and other 'enefits from the time the were dismissed up to the time the are
actuall reinstated.
,SS<;: ?@A Petitioners& as officers of the corporation could 'e +ointl and severall held
lia'le with the corporation in this case.
B;!": As a general rule& Corporation is vested ' law with a personalit separate and distinct
from the persons composing it& including its officers as well as from that of an other legal entit
to which it ma 'e related. Bowever& the legal fiction that a corporation has a personalit
separate and distinct from stoc$holders and mem'ers ma 'e disregarded on the following
instance: a* deli'eratel and maliciousl designed to evade financial o'ligations to emploees>
'* used as a means to perpetrate fraud or an illegal act or c* circumvention of statutes.
,n this case& the dismissed wor$ers did not allege or show that petitioners& as officers of the
corporation& did the instances mentioned a'ove.
Thus& Petitioners cannot 'e held +ointl and severall lia'le with the P,F Corporation.
A8T;: A.C. Ransom !a'or <nion5CC!< vs. A!RC case is not applica'le in this case. A.C.
Ransom was a famil corporation and that during the stri$e the mem'ers of the famil organi%ed
another corporation which was the Rosario ,ndustrial Corporation to which all the assets of the
A.C. Ransom Corporation were transferred to continue its 'usiness which acts of such officers
and agents of A.C. Ransom Corporation were intended to avoid pament of its o'ligations to its
emploees.
5A compan manager acting in good faith within the scope of his authorit in terminating the
services of certain emploees cannot 'e held personall lia'le for damages. Mere ownership '
a single SB or ' another corpo of all or nearl all capital stoc$s of the corpo is not ' itself
sufficient ground for disregarding the separate corporate personalit
FRANCISCO V. DEL ROSARIO vs. NLRC ; LEONARDO V. ATIENZA
FACTS:
The Philippine 8verseas ;mploment Administration (P8;A* promulgated a decision
dismissing the complaint for mone claims for lac$ of merit. ,t was appealed to the A!RC which
reversed the P8;A decision and ordered Philsa Construction and Trading Co.& ,nc. (the
recruiter* and Arie' ;nterprises (the foreign emploer* to +ointl and severall pa private
respondent his salar differentials and vacation leave 'enefits. The case was elevated to the
Supreme Court& 'ut the petition was dismissed and entr of +udgment was made.
A writ of e-ecution was issued ' the P8;A 'ut it was returned unsatisfied as Philsa was no
longer operating and was financiall incapa'le of satisfing the +udgment. Private respondent
moved for the issuance of an alias writ against the officers of Philsa. This motion was opposed
' the officers& led ' petitioner& the president and general manager of the corporation. The
P8;A issued a resolution which ordered that an alias of e-ecution 'e issued against the
properties of petitioner and if insufficient& against the cash and@or suret 'ond of #onding
Compan concerned for the full satisfaction of the +udgment awarded.
Petitioner appealed to the A!RC. The A!RC dismissed the appeal on the theor that the
corporate personalit of Philsa should 'e disregarded 'ecause under the findings of P8;A& it
appeared that Philsa Construction Q Trading Co.& ,nc.& represented ' Francisco V. del Rosario&
President and :eneral Manager& was formerl a registered construction contractor whose
authorit was originall issued on Jul 13& 34.2 'ut was alread delisted from the list of
agencies@entities on August 37& 342C for inactivit. And that another corporation& Philsa
,nternational Placement Q Services Corp.& composed of practicall the same set of
incorporators@stoc$holders& was registered as a licensed private emploment agenc whose
license was issued on Aovem'er 7& 3423& represented ' the same Mr. Francisco V. del
Rosario as its President@ :eneral Manager.
Bence& this petition& alleging that the A!RC gravel a'used its discretion. The Court issued a
TR8 en+oining the enforcement of the A!RCPs decision.
,ssue: ?on the corporate fiction should 'e disregarded
Beld: no. under the law a corporation is 'estowed with +uridical personalit separate and distinct
from its SB. #ut when the +uridical personalit of the corpo is used to defeat pu'lic convenience&
+ustice wrong protect fraud or defend crime. The corpo shall 'e considered as a mere
association of persons and its responsi'le officers and@or stoc$holders shall 'e lia'le for the
o'ligations of a stoc$holders or a corpo and its successor in interest shall 'e considered as one
and the lia'ilit of the former shall attach to the state.
#ut for the separate +uridical personalit of a corpo to 'e disregarded& the wrongdoing must
clearl and convincingl esta'lished. ,t cannot 'e presumed. !i$ewise& su'stantial identit of the
incorporators of the corporation does not necessaril implied fraud
V'$$a R#9 T(ans'% vs. F#((#(
17 SCRA 2)7
Facts:
Jose M. Villarama was an operator of 'us transportation& under the 'usiness name of Villa Re
Transit. Villarama sold the two certificates of pu'lic convenience to the Pangasinan
Transportation Compan& ,nc. (PAATRAAC8* with the condition that Villarama shall not for a
period of 3/ ears from the date of this sale& appl for an TP< service identical or competing
with the 'uer. Three months after the sale a corporation called Villa Re Transit& ,nc. was
organi%ed wherein the wife& 'rother and sister5in5law of Villarama were officer and su'scri'ers
of the corporation. ,n less than a month after its registration in S;C five5certificate of pu'lic
convenience were 'ought from Valentin Fernando. Valentine owed Ferrer sum of mone and
the 1 out of 7 certificates of pu'lic convenience sold to Villarama was su'+ected to auction sale
' sheriff in the case of collection of sum of mone.
#efore the PSC approval of the sale& the sheriff sold the two certificates of pu'lic convenience in
favor of Ferrer as the highest 'idder which sold ' the latter to Pantranco.
Pantranco& filed a third5part complaint against Jose M. Villarama& alleging that Villarama and
the Corporation& are one and the same> that Villarama and@or the Corporation was dis9ualified
from operating the two certificates in 9uestion ' virtue of the agreement.
,ssues:
3. ?hether or not the stipulation 'etween the parties for the sale of two certificates is validI
1. Considering the agreement is valid& whether or not the stipulation 'inds the CorporationI
Beld:
Ta$ing account of the evidence& together with testimon& it would appear that Villarama supplied
the organi%ation e-penses and the assets of the Corporation& such as truc$s and e9uipment.
Villarama himself admitted that he mingled the corporate funds with his own mone.
The Court find that although it is in the nature of an agreement suppressing competition& it is&
however& merel ancillar or incidental to the main agreement which is that of sale. The
suppression or restraint is onl partial or limited: first& in scope& it refers onl to application for
TP< ' the seller in competition with the lines sold to the 'uer> second& in duration& it is onl for
ten (3/* ears> and third& with respect to situs or territor& the restraint is onl along the lines
covered ' the certificates sold. The disputed stipulation is onl incidental to a main agreement&
the same is reasona'le and it is not harmful nor o'no-ious to pu'lic service. ,t does not appear
that the ultimate result of the clause or stipulation would 'e to leave solel to Pantranco the right
to operate along the lines in 9uestion& there' esta'lishing monopol or predominance
appro-imating thereto. ?e 'elieve the main purpose of the restraint was to protect for a limited
time the 'usiness of the 'uer.
The stipulation is valid and reasona'le. Baving arrived at this conclusion& and considering that
the preponderance of the evidence have shown that Villa Re Transit& ,nc. is itself the alter ego
of Villarama& that the said Corporation should& until the e-piration of the 35ear period
a'ovementioned& 'e en+oined from operating the line su'+ect of the prohi'ition. For the rules is
that a seller or promissor ma not ma$e use of a corporate entit as a means of evading the
o'ligation of his covenant.
B.) Alter Ego cases
A(n!$d vs. +'$$'%s and Pa%%#(s!n, L%d. ,A$%#( E.! Cas#-
)) Phil C6) (3416*
Facts:
:.C. Arnold was in the emplo of the ,nternational #an$ing Corporation of Manila. 8n Jul 63&
343C& C.". ?illits and ,.!. Patterson were partners doing 'usiness in San Francisco& California
under the name of ?illits and Patterson. The entered into a written contract into which :.C.
Arnold was emploed as the agent of the firm in the Philippine ,slands.
The 'usiness of the firm in the Philippines ver rapidl increased. A dispute arose 'etween the
plaintiff and the firm as to the construction of the contract as to the amount which plaintiff should
receive for his services.
Meanwhile& Patterson retired from the firm and ?illits 'ecame the sole owner of his assets. A
short time after that ?illits came to Manila and organi%ed a corporation $nown as ?illits and
Patterson& !td. ,n legal effect& the San Francisco Corporation too$ over and ac9uired all of the
assets and lia'ilities of the Manila Corporation.
Another instrument was made 'etween :.C. Arnold and ?illits which defined and specified the
compensation which the plaintiff received for his services. ?illits received and confirmed this
letter ' signing the name of ?illits and Patterson& # C.". ?illits.
The creditorEs committee of the corporation opposed the pament of compensation due the
plaintiff& Arnold under a contract letter signed ' ?illits& the controlling stoc$holder& without
'oard approval. The signing President was the controlling stoc$holder of the corporation.
,ssue:
?hether or not the contract letter was validI
Ruling:
The Court held the validit of the contract and Nalthough the plaintiff was the president of the
local corporation& the testimon is conclusive that 'oth of them were what is $nown as a one
man corporation& and ?illits& as the owner of all the stoc$s& was the force and dominant power
which controlled them.
The Court found that there was no fraud or collusion 'etween plaintiff and ?illits& and it is ver
apparent that the contract letter was to the mutual interests of 'oth parties.
?here the stoc$ of a corpo is owned ' one person where' the corporation functions onl for
the 'enefit of such individual owner& the corpo and the individual shareholders 'e the same
Monetar +udgment was entered in favor of plaintiff
La Ca<"ana C!//## Fa&%!(9, In&. vs. a'sa1an n. <.a Man..a.a=a sa La Ca<"ana
,M- ,A$%#( #.! &as#-
46 PB,! 3C/ (3476*
Facts:
Petitioner Tan Tong since 3461 has 'een engaged in 'uing and selling gaugau under the trade
name !a Campana :augau Pac$ing. 8n Jul C& 347/& Tan Tong and his famil as sole
incorporators and stoc$holders& organi%ed the !a Campana Coffee Factor Co.& ,nc.& with its
principal office located in the same place as that of !a Campana :augau Pac$ing.
A ear 'efore the formation of the corporation& Tan Tong entered into a collective 'argaining
agreement with the Philippine !egion of 8rgani%ed ?or$ers (P!8?*& to which the union of Tan
TongEs emploees headed ' Manuel ;. Sadde was then affiliated. Seceding& however& from
the P!8?& Tan TongEs emploees later formed their own organi%ation $nown as 0aisahan ng
mga Manggagawa sa !a Campana.
8n Jul 34& 3473& 0aisahan& which& as of that date& counted with CC mem'ers wor$ers all of
them 'oth !a Campana :augau Pac$ing and !a Campana Coffee Factor Co.& ,nc. K presented
a demand for higher wages and more privileges& the demand 'eing addressed to !a Campana
Starch and Coffee factor& ' which name the sought to designate& so it appears& the !a
Campana :augau Pac$ing and !a Campana Coffee Factor Co.& ,nc.
As the demand was not granted& the "epartment of la'or certified the dispute to the Court of
,ndustrial Relations. Tan Tong alleges that the CR had no +urisdiction of the case 'ecause
petitioner !a Campana Coffee Factor& ,nc. has onl 3) emploees& onl 7 of whom are
mem'ers of the respondent union and therefore the a'sence of the +urisdictional num'er (6// of
wor$ers as provided ' sections 3 and ) of Commonwealth Act Ao. 3/6.
,ssue: ?8A !a campana coffee factor inc and !A campana gaugau pac$ing corpo are one
and the same
Beld: Les. The piercing doctrine shall appl.
The 1 companies are operating as one 'usiness though with two trade names& the two
companies are operating under 3 single mgt.& office and paroll. The la'orers of gaugau factor
and the coffee factor were interchangea'le& as the were sometimes transferred to the coffee
factor and vice5versa. Their truc$s carried 'oth the gaugau and the coffee 'o-es for deliver.
Thus& the attempt to ma$e the 1 factories appear as 1 separte 'usinesses when in realit the
are 3& is a device to defeat the ends of the law and should not 'e permitted
YUTIVO SONS HARD+ARE COMPANY, "#%'%'!n#(,
vs.
COURT OF TA> APPEALS and COLLECTOR OF INTERNAL REVENUE, (#s"!nd#n%s
FACTS:
This is a petition for review of a decision of the Court of Ta- Appeals ordering petitioner
to pa to respondent Collector of ,nternal Revenue the sum of P3&1CC&3.C..6 as sales ta-
deficienc for the third 9uarter of 34). to the fourth 9uarter of 347/> inclusive& plus .7D
surcharge thereon& e9uivalent to P6)4&C61.7)& or a sum total of P1&137&2/4.1.& plus costs of
the suit.
Lutivo Sons and Bardware Co. engaged in 'usiness of importation of cars and truc$s&
which sold to Southern Motors ,nc. Sales ta-es were paid ' Lutivo on this first sale. Southern
Motors sold the vehicles to the Pu'lic. The Collecot of C,R sought to impose sales to Southern
MotorEs 'ut on Southern MotorsEs higher sales to the pu'lic. !ower Court agreed& hence the
appeal.
,SS<;:
?hether or not Lutivo and Southern Motors ,nc. are alter ego to avoid ta- collections so as to
pre+udice the :overnment.
Beld: Les. Although southern motors was organi%ed to perpertuate fraud however& it was
indeed actuall owned and controlled ' Lutivo as to ma$e it a mere su'sidiar or 'ranch of the
latter. Lutivo through common officers and directors e-ercised fill control over southern motors
cash funds& policies e-penditures and o'ligations. Shareholders of Sm are mere nominal SB
holding the share for and in 'ehalf of utivo.
3. The founder of southern motors are closel related with utivo either ' 'lood or
affinit and most of its SB are mem'ers of utivo famil
1. Records of dis'ursement&purchases for the account of southern motors are $ept '
utivo and southern motors merel $eeps a summar record on the 'asis of the
information received from utivo
The CTA correctl disregarded the alleged separate corporate personalit of southern motors in
order to arrive at the true ta- lia'ilit of utivo
L'd#$$ C!. v. C!$$#&%!( !/ In%#(na$ R#v#n*#
Facts: Facts: The case is an appeal from the decision of the Court of Ta- Appeals imposing a
ta- deficienc lia'ilit of P3&63.&C14.C3 on !iddell Q Co.& ,nc.
The petitioner& !iddell Q Co. ,nc.& (!iddell Q Co. for short* is a domestic corporation
esta'lish in the Philippines on Fe'ruar 3& 34)C. From 34)C until Aovem'er 11& 34)2 when the
purpose clause of the Articles of ,ncorporation of !iddell Q Co. ,nc.& was amended so as to limit
its 'usiness activities to importations of automo'iles and truc$s& !iddell Q Co. was engaged in
'usiness as an importer and at the same time retailer of 8ldsmo'ile and Chevrolet passenger
cars and :MC and Chevrolet truc$s.
8n "ecem'er 1/& 34)2& the !iddell Motors& ,nc. was organi%ed and registered with the
Securities and ;-change Commission with an authori%ed capital stoc$ of P3//&/// of which
P1/&/// was su'scri'ed and paid for as follows: ,rene !iddell wife of Fran$ !iddell 34&44C
shares and Messrs. Marcial P. !ichauco& ;. 0. #romwell& V. ;. del Rosario and ;smenia Silva&
3 share each.
#eginning Januar& 34)4& !iddell Q Co. stopped retailing cars and truc$s> it conveed them
instead to !iddell Motors& ,nc. which in turn sold the vehicles to the pu'lic with a steep mar$5up.
Since then& !iddell Q Co. paid sales ta-es on the 'asis of its sales to !iddell Motors ,nc.
considering said sales as its original sales.
illustrate: a car with engine motor Ao. 131623 was sold ' !iddell Q Co. ,nc. to !iddell Motors&
,nc. on Januar 3.& 34)2 for P)&7)C&///.// including ta-> the price of the car was
P)&366&///.16& the ta- paid 'eing P)36.11& at 3/D. And when this car was later sold (on the
same da* ' !iddell Motors& ,nc. to P.V. !uistro for P77//& no more sales ta- was paid.33 ,n
this price of P77// was included the P)36.61 representing ta-es paid ' !iddell Q Co. ,nc. in
the sale to !iddell Motors& ,nc. "educting P)36.61 representing ta-es paid ' !iddell Q Co.& ,nc.
the price of P77//& the 'alance of P7&/2..C2 would have 'een the net selling price of !iddell Q
Co.& ,nc. to the general pu'lic (had !iddell Motors& ,nc. not participated and intervened in the
sale*& and 37D sales ta- would have 'een due. ,n this transaction& P6)4.C2 in the form of ta-es
was evaded. All the other transactions (numerous* e-amined in this light will inevita'l reveal
that the :overnment coffers had 'een deprived of a si%ea'le amount of ta-es.
The Collector of ,nternal Revenue argued that the !idell Motors& ,nc. was 'ut an alter ego of
!iddell Q Co. and concluded that for sales ta- purposes& those sales made ' !iddell Motors&
,nc. to the pu'lic were considered as the original sales of !iddell Q Co. (!,";!! Motors then
does not pa sales ta-es* hence the imposition of ta- deficienc.
,ssue: ?8A liddell and co. inc and the liddell motors inc. are identical corporations the latter
'eing merel the alter ego of the former
Ruling: es. Fran$ owned 'oth corporation as his wife could have had the mone to pa her
su'scriptions. Such fact alone though not sufficient to warrant piercing& 'ut under the proven
facts& liddell motors was the medium created ' liddell and compan to reduce its ta- lia'ilit. A
ta-paer has the legal right to decrease& ' means w@c the law permits& the amount of what
otherwise would 'e his ta-es or altogether avoid them. #ut a dumm corporation serving no
'usiness purposes other than as a 'lind will disregarded.
C,R& for sales ta- purposes& those sales made ' liddell motors inc to the pu'lic were
considered as the original sales of liddell and compan.
!iddell motors inc pursued no activities e-cept to secure cars& truc$s& and spare parts from
liddell and compan and then sell them to the general pu'lic
Ramire% Telephone Corporation vs. #an$ of America (Pasensa na sa digest $asi most of the
facts are in Spanish language and here is what i understand a'out the case*
Ra<'(#? T#$#"1!n# C!("!(a%'!n vs. Ban@ !/ A<#('&a
Facts:
Ru'en Ramire% was held lia'le in a civil case where he inde'ted mone from #an$ of America.
Be lost the case and a writ of garnishment of his propert was ordered. Bowever Ramire% has
or might have deposit funds in Ramire% Telephone ,nc. and such fund is sufficient to cover the
amount owed to the 'an$. Ramire%& as a defense alleged that such fund cannot 'e garnished
'ecause he and the corporation has a separate and distinct personalit.
,ssue: ?hether or not the fund ma 'e garnished to satisf the de'ts of Ramire% to the #an$.
Beld:
Les. Corporate 'an$ account could 'e garnished despite the fact that
3. Ramire% himself leased her'osas premises 'ec although Ramire% was the tenant& the
compan in truth occupied the premises
1. Ramire% paid the rents with chec$s of the telephone compan and
6. .7D of the shares of the compan 'elonged to Ramire% and his wife
Corporate personalit ma 'e disregarded where the defendant stoc$holder holds .7D of the
stoc$ corporation together with his wife. ?hile respect for the corporate personalit as such is
the general rule& the veil of corporate fiction ma 'e pierced and the funds of the corporation
ma 'e garnished to satisf de'ts of a principal stoc$holder& T8 A"M,A,ST;R TB; ;A"S 8F
J<ST,C;.
G*a%s!n vs NLRC
Joll M. Almoradie was first emploed ' Mercur ;-press ,nternational Courier Service& ,nc.
(M;R;R Represented ' its Vice5president and Manager Mr. Benr 8ciers* in 8cto'er& 3426 as
Messenger receiving a monthl salar of P2//.//. ?hen it closed its operations& Almoradie was
a'sor'ed ' M;R;RPs sister compan Philippine ,ntegrated !a'or Assistance Corp. (Philac*&
li$ewise as Messenger with an increased salar of P3&1//.//.
,n Septem'er& 342C& Almoradie was transferred to :uatson Travel& allegedl also a sister
compan of M;R;R and Philac& as !iaison 8fficer with a salar of P3&2C).//. Thereafter& he
was promoted to the position of Sales Representative sometime in April& 3422. 8n April 6/&
3422& Almoradie received three separate memoranda re9uiring him to e-plain wh he refused to
act as salesman and for other different reasons. Be filed his repl to said allegations& however
Benr 8cier summon Almoradie to his office and as$ him to resign& if not 8cier will file a case
against him and that he has a ver good lawer to litigate the case. Almoradie was force to
e-ecute a resignation letter on his own handwriting. Thereafter& he filed an illegal dismissal
case. Be won the case& the A!RC decided that his resignation was not voluntar. Bowever
petitioner contends that :uatson Travel Compan& Philac Mere- have separate and distinct
legal personalities such that the latter companies should not 'e held lia'le> assuming& for the
sa$e of argument that private respondent was illegall dismissed.
,ssue: ?on lia'ilit attached to the 6 companies appling alter ego doctrine
Beld: es. The other affiliated corporations were also made lia'le ' the A!RC for the
separation pa and 'ac$wages for which a corporate emploer was held lia'le.
,n contesting the inclusion of the other corpo to the lia'ilit on the that the were separate and
distinct legal personalities& the court too$ the following proven facts into consideration in piercing
the veil of corporate fiction:
3. The 6 companies were owned ' one famil
1. Ma+orit of the officers of the companies are the same
6. The companies are located in one 'ldg. and use the same messengerial service
). The terminated emploee was not paid separation fee when he was a'sor'ed ' the
other affiliate compan& nor was he made to resign from the first corporation
C!n&#"% :*'$d#(s 'n& vs NLRC
Petitioner Concept #uilders& ,nc.& a domestic corporation& with principal office at 677 Masan
Road& Valen%uela& Metro Manila& is engaged in the construction 'usiness. Private respondents
were emploed ' said compan as la'orers& carpenters and riggers. private respondents were
served individual written notices of termination of emploment ' petitioner& effective on
Aovem'er 6/& 3423. ,t was stated in the individual notices that their contracts of emploment
had e-pired and the pro+ect in which the were hired had 'een completed. Pu'lic respondent
found it to 'e& the fact& however& that at the time of the termination of private respondentPs
emploment& the pro+ect in which the were hired had not et 'een finished and completed.
Petitioner had to engage the services of su'5contractors whose wor$ers performed the functions
of private respondents. Aggrieved& private respondents filed a complaint for illegal dismissal&
unfair la'or practice and non5pament of their legal holida pa& overtime pa and thirteenth5
month pa against petitioner. The private respondents won the case and concept 'uilders was
order to pa the sum of P344&2//.//. the amount was partiall paid and when the Concept
#uilders was pursued for the remaining 'alance& the sheriff was surprised that the address of
the Concept #uilders was now under Bdro Phils under "ennis Cueg$eng. Cueg$eng
opposed the 'rea$ open order ' the A!RC. Private respondents alleged that Concept #uilders
and Bdro Phils has the same incorporators and stoc$holders evidenced ' general information
sheet of the two corporations. Petitioner alleges that the A!RC committed grave a'use of
discretion when it ordered the e-ecution of its decision despite a third5part claim on the levied
propert. Petitioner further contends& that the doctrine of piercing the corporate veil should not
have 'een applied& in this case& in the a'sence of an showing that it created BPP, in order to
evade its lia'ilit to private respondents. ,t also contends that BPP, is engaged in the
manufacture and sale of steel& concrete and iron pipes& a 'usiness which is distinct and
separate from petitionerPs construction 'usiness. Bence& it is of no conse9uence that petitioner
and BPP, shared the same premises& the same President and the same set of officers and
su'scri'ers.
,ssue: ?on the piercing doctrine shall appl
Beld: Les& while petitioner claimed that it ceased its 'usiness operation on april 14&342C it filed
an information sheet with the S;C stating the same address as the BP,. 8n the other hand& the
BP, su'mitted on the same da a similar info sheet stating the same address. #oth info sheets
were filed ' the secretar of 'oth corporations& virgilio casino. Also 'oth corpo had the same
resident& the same #8"& same corporate officers& su'stantiall same su'scri'er.
Clearl BP, is o'viousl a 'usiness conduit of petitioner corpo and its mergence was s$illfull
orchestrated to avoid financial lia'ilit that alread attached to petitioner corpo.
Pro'ative factors that will +ustif the application of doctrine:
3. stoc$ ownership ' one or common ownership of 'oth corp
1. ,dentit of directors and officers
6. Manner of $eeping corporate 'oo$s and records
). Methods of conducting the 'usiness