Commercial Law Review Digests | 1

013 Lao, Jan Michael Dave S.

Date September 29, 2010
Kukan Intl Corp. vs. Hon. Amor Reyes G.R.
182729
No.
Ponent
Velasco, J.
e

DOCTRINE: Piercing the veil of corporate entity applies to determination of liability not
of jurisdiction.

FACTS: Romeo M. Morales doing businessunder the name RM Morales drophies and
Plaqueswas awarded a P5 million contract for the supply andinstallation of signages in a
building constructed in Makati. Morales complied with his contractual obligations but he
was paid only the amount of P1,976,371.07 leaving a balance of P1,412,130.09. He filed
a case against Kukan, Inc., for sum of money withthe RTC of Manila. Kukan Inc., stopped
participating inthe proceedings in, hence, it was declared in default and Morales
presented his evidence ex parte against petitioner and a decision was rendered in favour
of the latter. during the execution,the sheriff levied the personal properties found at the
office of Kukan, Inc. Claiming it owned the properties levied, Kukan International
Corporation filed an affidavit of third Party Claim. Morales filed an omnibus Motion
praying to apply the principle of piercing theveil of corporate entity. He alleged that
Kankun, Inc.and KIC are one and the same corporation.

ISSUE/S: If the trial and appellate courts correctly applied, under the
premises, the principle of piercing the veil of corporate fiction.

RULING: No.
The principle of piercing the veil of corporate fiction, and the resulting
treatment of two related corporations as one and the same juridical person with respect
to a given transaction, is basically applied only to determine established liability; it is not
available to confer on the court a jurisdiction it has not acquired, in the first place, over a
party not impleaded in a case. Elsewise put, a corporation not impleaded in a suit cannot
be subject to the courts process of piercing the veil of its corporate fiction. In that
situation, the court has not acquired jurisdiction over the corporation and, hence, any
proceedings taken against that corporation and its property would infringe on its right to
due process. Aguedo Agbayani, a recognized authority on Commercial Law, stated as
much:
Piercing the veil of corporate entity applies to determination of liability not of
jurisdiction.

This is so because the doctrine of piercing the veil of corporate fiction comes to
play only during the trial of the case after the court has already acquired jurisdiction
over the corporation. Hence, before this doctrine can be applied, based on the evidence
presented, it is imperative that the court must first have jurisdiction over the
corporation.