AVON DALE GARMENTS VS.

NLRC

FACTS: Private respondents were employees of petitioner Avon Dale Garments, Inc. and its predecessor-ininterest, Avon Dale Shirt Factory. Following a dispute brought about by the rotation of workers, a compromise agreement was entered into between petitioner and private respondents wherein the latter were terminated from service and given their corresponding separation pay. However, upon refusal of the petitioner to include in the computation of private respondents' separation pay the period during which the latter were employed by Avon Dale Shirt Factory, private respondents filed a complaint with the labor arbiter claiming a deficiency in their separation pay. According to private respondents, their previous employment with petitioner's predecessor-in-interest, Avon Dale Shirt Factory, should be credited in computing their separation pay considering that Avon Dale Shirt factory was not dissolved and they were not in turn hired as new employees by Avon Dale Garments, Inc.

ISSUE: Whether or not the petitioner is a separate and distinct entity and therefore not liable for private respondents' separation pay from Avon Dale Shirt Factory?

RULING: No. The two entities cannot be deemed as separate and distinct where there is a showing that one is merely the continuation of the other. In fact, even a change in the corporate name does not make a new corporation, whether effected by a special act or under a general law, it has no effect on the identity of the corporation, or on its property, rights, or liabilities. The mere filing of the Articles of Dissolution with the Securities and Exchange Commission, without more, is not enough to support the conclusion that actual dissolution of an entity in fact took place. On the contrary, the prevailing circumstances in this case indicated that petitioner is not distinct from its predecessor Avon Dale Shirt Factory, but in fact merely continued the operations of the latter under the same owners, the same business venture, at same address, and even continued to hire the same employees (herein private respondents).

BANK OF AMERICA VS. CA

FACTS: Private Respondents were engaged in the shipping business and owned two vessels through their wholly-owned corporations. In order to increase the number of their vessels they obtained a loan from the petitioner. The petitioner banks acquired, through private respondents corporations as the borrowers four additional vessels. The vessels were registered in the names of their corporations while the operation and the funds derived therefrom were placed under the complete and exclusive control

and disposition of the petitioners and the possession the vessels was also placed by defendant banks in the hands of persons selected and designated by the petitioner. The private respondents claimed that petitioner as trustees did not fully render an account of all the income derived from the operation of the vessels and because of the breach of the petitioners fiduciary duties and negligence they lost revenues and the said vessels prompting the private respondents to file a complaint against petitioner. The petitioner filed a motion to dismiss the complaint for lack of cause of action against them.

ISSUE:

Whether or not the complaint should be dismissed on the ground that plaintiffs have no cause of action against defendants since plaintiffs are merely stockholders of the corporations which are the registered owners of the vessels and the borrowers of petitioners?

RULING: No. Petitioners' argument that private respondents, being mere stockholders of the foreign corporations, have no personalities to sue, and therefore, the complaint should be dismissed, is untenable. A case is dismissible for lack of personality to sue upon proof that the plaintiff is not the real party-in-interest. Lack of personality to sue can be used as a ground for a Motion to Dismiss based on the fact that the complaint, on the face thereof, evidently states no cause of action. While the complaint was filed only by the stockholders of the corporate borrowers, the latter are wholly-owned by the private respondents, aside from the said corporate borrowers being but their alter-egos, they have interests of their own in the vessels. The private respondents have the right to demand for an accounting from defendants (herein petitioners), as trustees by reason of the fiduciary relationship that was created between the parties involving the vessels in question.

REYNOSO VS. CA

FACTS: Commercial Credit Corporation of Quezon City (CCC-QC) entered into an exclusive management contract with Commercial Credit Corporation (CCC) whereby the latter was granted the management and full control of the business activities of the former. CCC designated the petitioner, one of its employees, as a resident manager of said branch. Petitioner, in order to boost the business activities of CCC-QC, deposited his personal funds in the company. In return, CCC-QC issued to him its interest-bearing promissory notes. Thereafter, a complaint for sum of money was instituted by CCC-QC against petitioner, who had in the meantime been dismissed from his employment by CCC. The complaint alleged that petitioner embezzled the funds of CCC-QC. In Answer with counterclaim, petitioner denied having unlawfully used funds of CCC-QC and asserted that the sum claimed represented his money placements in CCC-QC. The complaint was dismissed while the court found the counterclaim

meritorious. The judgment remained unsatisfied, prompting petitioner to file a Motion for Alias Writ of Execution, Examination of Judgment Debtor, and to Bring Financial Records for Examination to Court. CCC-QC filed an Opposition to petitioners motion, alleging that the possession of its premises and records had been taken over by CCC. Meanwhile, CCC became known as the General Credit Corporation. General Credit Corporation filed a Special Appearance and Opposition alleging that it was not a party to the case, and therefore petitioner should direct his claim against CCC-QC and not General Credit Corporation.

ISSUE: Whether or not the General Credit Corporation is a separate and distinct entity from CCC-QC and therefore the judgment in favor of petitioner cannot be executed against said corporation?

RULING: No. The corporate fiction has to be disregarded when necessary in the interest of justice. The defense of separateness will be disregarded where the business affairs of a subsidiary corporation are so controlled by the mother corporation to the extent that it becomes an instrument or agent of its parent. But even when there is dominance over the affairs of the subsidiary, the doctrine of piercing the veil of corporate fiction applies only when such fiction is used to defeat public convenience, justify wrong, protect fraud or defend crime. Factually and legally, the CCC had dominant control of the business operations of CCCQC. The exclusive management contract insured that CCC-QC would be managed and controlled by CCC and would not deviate from the commands of the mother corporation. In addition to the exclusive management contract, CCC appointed its own employee, petitioner, as the resident manager of CCC-QC. Faced with the financial obligations which CCC-QC had to satisfy, the mother firm closed CCC-QC, in obvious fraud of its creditors. CCC-QC, instead of opposing its closure, cooperated in its own demise. Conveniently, CCC-QC stated in its opposition to the motion for alias writ of execution that all its properties and assets had been transferred and taken over by CCC. Under the foregoing circumstances, the contention of respondent General Credit Corporation, the new name of CCC, that the corporate fiction should be appreciated in its favor is without merit.

CONCEPT BUILDERS VS. NLRC

FACTS: Private respondents filed a complaint for illegal dismissal, unfair labor practice and non-payment of their legal holiday pay, overtime pay and thirteenth-month pay against petitioner. The Labor Arbiter rendered judgment ordering petitioner to reinstate private respondents and to pay them back wages. The Labor Arbiter issued a writ of execution directing the sheriff to execute the Decision. The writ was partially satisfied through garnishment of sums from petitioner's debtor. An Alias Writ of Execution was issued by the Labor Arbiter directing the sheriff to collect from herein petitioner the balance of the judgment

award, and to reinstate private respondents to their former positions. A certain Dennis Cuyegkeng filed a third-party claim with the Labor Arbiter alleging that the properties sought to be levied upon by the sheriff were owned by Hydro Phils., Inc. (HPPI) of which he is the Vice-President. Private respondents filed a "Motion for Issuance of a Break-Open Order," alleging that HPPI and petitioner corporation were owned by the same incorporator/stockholders.

ISSUE: Whether or not the doctrine of piercing the corporate fiction should be applied?

RULING: Yes, because the elements to pierce the veil of corporate fiction is present in the case at bar. The test in determining the applicability of the doctrine of piercing the veil of corporate fiction is as follows: 1. Control; 2. Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive legal duty or dishonest and unjust act in contravention of plaintiff's legal rights; and 3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of. In the case at bar, the two corporations has the same address and occupy the same premises. Furthermore both corporations had the same president, the same board of directors, the same corporate officers, and substantially the same subscribers. Petitioner ceased its business operations in order to evade the payment to private respondents of back wages and to bar their reinstatement to their former positions. HPPI is obviously a business conduit of petitioner and its emergence was skillfully orchestrated to avoid the financial liability that already attached to petitioner.

CRUZ VS. DALISAY

FACTS: In a sworn complaint, Adelio C. Cruz charged Quiterio L. Dalisay, Senior Deputy Sheriff of Manila, with "malfeasance in office, corrupt practices and serious irregularities". Respondent sheriff attached and levied the money belonging to complainant Cruz when he was not himself the judgment debtor in the final judgment sought to be enforced but rather the company known as "Qualitrans Limousine Service, Inc.," a duly registered corporation.

ISSUE: Whether or not the respondent erred in enforcing the judgment against the complainant?

RULING: Yes. Respondent's actuation in enforcing a judgment against complainant who is not the judgment debtor in the case calls for disciplinary action. Considering the ministerial nature of his duty in enforcing writs of execution, what is incumbent upon him is to ensure that only that portion of a decision ordained or decreed in the dispositive part should be the subject of execution. The tenor of the NLRC judgment and the implementing writ is clear enough. It directed Qualitrans Limousine Service, Inc. to reinstate the discharged employees and pay them full backwages. Respondent, however, chose to "pierce the veil of corporate entity" usurping a power belonging to the court and assumed improvidently that since the complainant is the owner/president of Qualitrans Limousine Service, Inc., they are one and the same. It is a well-settled doctrine both in law and in equity that as a legal entity, a corporation has a personality distinct and separate from its individual stockholders or members. The mere fact that one is president of a corporation does not render the property he owns or possesses the property of the corporation, since the president, as individual, and the corporation are separate entities.

LIPAT VS. PACIFIC BANKING CORPORATION

FACTS: Petitioners owned "Bela's Export Trading" (BET), a single proprietorship with principal office at No. 814 Aurora Boulevard, Cubao, Quezon City. In order to facilitate the convenient operation of BET, Estelita Lipat executed a special power of attorney appointing Teresita Lipat as her attorney-in-fact to obtain loans and other credit accommodations from respondent Pacific Banking Corporation (Pacific Bank). She likewise authorized Teresita to execute mortgage contracts on properties owned or co-owned by her as security for the obligations to be extended by Pacific Bank including any extension or renewal thereof. Teresita, by virtue of the special power of attorney, was able to secure for and in behalf of her mother and BET, a loan from Pacific Bank and as security therefor, the Lipat spouses, as represented by Teresita, executed a Real Estate Mortgage over their property. Thereafter, BET was incorporated into a family corporation named Bela's Export Corporation (BEC) in order to facilitate the management of the business. Eventually, the loan was later restructured in the name of BEC and subsequent loans were obtained by BEC with the corresponding promissory notes duly executed by Teresita on behalf of the corporation. The promissory notes, export bills, and trust receipt eventually became due and demandable. Unfortunately, BEC defaulted in its payments. Consequently, the real estate mortgage was foreclosed and after compliance with the requirements of the law the mortgaged property was sold at public auction. The spouses Lipat filed a complaint for annulment of the real estate mortgage issued over the property against Pacific Bank.

ISSUE: Whether or not the doctrine of piercing the veil of corporate fiction should be applied?

RULING: Yes. When the corporation is the mere alter ego or business conduit of a person, the separate personality of the corporation may be disregarded commonly referred to as the "instrumentality rule" or the alter ego doctrine, which the courts have applied in disregarding the separate juridical personality of corporations. The court found the evidence on record demolishes petitioners' contention that BET and BEC are separate business entities. The petitioners were the owners of BET and were two of the incorporators and majority stockholders of BEC. Both firms were managed by their daughter and were engaged in the garment business. Both firms held office in the same building owned by the Lipats. The business operations of the BEC were so merged with those of Mrs. Lipat such that they were practically indistinguishable. It could not have been coincidental that BET and BEC are so intertwined with each other in terms of ownership, business purpose, and management. Apparently, BET and BEC are one and the same and the latter is a conduit of and merely succeeded the former. Petitioners' attempt to isolate themselves from and hide behind the corporate personality of BEC so as to evade their liabilities to Pacific Bank is precisely what the classical doctrine of piercing the veil of corporate entity seeks to prevent and remedy. In our view, BEC is a mere continuation and successor of BET, and petitioners cannot evade their obligations in the mortgage contract secured under the name of BEC on the pretext that it was signed for the benefit and under the name of BET.

FIRST PHILIPPINE INTERNATIONAL BANK VS. CA

FACTS: The petitioner had an agreement with Demetrio Demetria and Jose Janolo for the two to purchase the parcels of land for a purchase price of P5.5 million pesos. The said agreement was made by Demetria and Janolo with the Banks manager, Mercurio Rivera. Later however, the Bank, through its conservator, Leonida Encarnacion, sought the repudiation of the agreement as it alleged that Rivera was not authorized to enter into such an agreement, hence there was no valid contract of sale. Subsequently, Demetria and Janolo sued Producers Bank. The regional trial court ruled in favor of Demetria et al. The Bank filed an appeal with the Court of Appeals. Meanwhile, Henry Co, who holds 80% shares of stocks with the said Bank, filed a motion for intervention with the trial court. The trial court denied the motion since the trial has been concluded already and the case is now pending appeal. Subsequently, Co, filed a separate civil case against Carlos Ejercito as successor-in-interest (assignee) of Demetria and Janolo seeking to have the purported contract of sale be declared unenforceable against the Bank. Ejercito et al argued that the second case constitutes forum shopping.

ISSUE: Whether or not the second case constitutes forum shopping?

RULING:

Yes. There is forum shopping because there is identity of interest and parties between the first case and the second case. There is identity of interest because both cases sought to have the agreement, which involves the same property, be declared unenforceable as against the Bank. There is also identity of parties, or at least, of interests represented. Although the plaintiffs in the Second Case (Henry L. Co. et al.) are not name parties in the First Case, they represent the same interest and entity, namely, petitioner Bank. Petitioner cannot seek refuge in the corporate fiction that the personality of the Bank is separate and distinct from its shareholders because when the fiction 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 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. The corporate veil cannot be used to shield an otherwise blatant violation of the prohibition against forum-shopping. Shareholders, whether suing as the majority in direct actions or as the minority in a derivative suit, cannot be allowed to trifle with court processes, particularly where, as in this case, the corporation itself has not been remiss in vigorously prosecuting or defending corporate causes and in using and applying remedies available to it. To rule otherwise would be to encourage corporate litigants to use their shareholders as fronts to circumvent the stringent rules against forum shopping.

FRANCISCO MOTORS CORPORATION VS. CA

FACTS: Petitioner filed a complaint against private respondents, spouses Gregorio and Librada Manuel, to recover the balance of the jeep body purchased by the latter from petitioner and the unpaid balance on the cost of repair of the vehicle. Private respondent Gregorio Manuel alleged as an affirmative defense that, while he was petitioner's Assistant Legal Officer, he represented members of the Francisco family in the intestate estate proceedings of the late Benita Trinidad. However, even after the termination of the proceedings, his services were not paid. Said family members, he said, were also incorporators, directors and officers of petitioner. Hence to petitioner's collection suit, he filed a counter permissive counterclaim for the unpaid attorney's fees. ISSUE: Whether or not the doctrine of piercing the veil of corporate entity should be applied?

RULING: No. The doctrine of piercing the corporate veil has no relevant application in the case at bar. The rationale behind piercing a corporation's identity in a given case is to remove the barrier between the corporation from the persons comprising it to thwart the fraudulent and illegal schemes of those who use the corporate personality as a shield for undertaking certain proscribed activities. However, in the case at bar, instead of holding certain individuals or persons responsible for an alleged corporate act, the situation has been reversed. It is the petitioner as a corporation which is being ordered to answer for the personal liability of certain individual directors, officers and incorporators concerned.

Considering the nature of the legal services involved, whatever obligation said incorporators, directors and officers of the corporation had incurred, it was incurred in their personal capacity. When directors and officers of a corporation are unable to compensate a party for a personal obligation, it is far-fetched to allege that the corporation is perpetuating fraud or promoting injustice, and be thereby held liable therefor by piercing its corporate veil.

GOOD EARTH EMPORIUM VS. CA

FACTS: A Lease Contract was entered into by and between private respondents, Roces-Reyes Realty (Roces), as lessor and petitioner, Good Earth Emporium (GEE), as lessee. The petitioner had defaulted in the payment of rentals, as a consequence of which, private respondent filed an ejectment case against the former. A judgment was rendered in favor of the private respondent and an Alias Writ of Execution was thereafter issued. GEE then filed a motion to quash the writ of execution which was denied. On appeal, the RTC reversed the decision of the MTC and granted the motion to quash the writ declaring the judgment debt as having been fully paid. ISSUE: Whether or not there was full satisfaction of the judgment debt in favor of respondent corporation which would justify the quashing of the Writ of Execution?

RULING: No. A corporation has a personality distinct and separate from its individual stockholders or members. Being an officer or stockholder of a corporation does not make one's property also of the corporation, and vice-versa, for they are separate entities. As a consequence of the separate juridical personality of a corporation, the corporate debt or credit is not the debt or credit of the stockholder, nor is the stockholder's debt or credit that of the corporation. The fact that at the time payment was made to the two Roces brothers, petitioner GEE was also indebted to respondent corporation for a larger amount, is not supportive of the Regional Trial Court's conclusions that the payment was in favor of the latter, especially in the case at bar where the amount was not receipted for by respondent corporation and there is absolutely no indication in the receipt from which it can be reasonably inferred, that said payment was in satisfaction of the judgment debt.

PNB VS. ANDRADA ELECTRIC &ENGINEERING COMPANY

FACTS:

Philippine National Bank (PNB) acquired ownership or management of some assets of the Pampanga Sugar Mill (PASUMIL), which had earlier been foreclosed and purchased at the resulting public auction by the Development Bank of the Philippines (DBP). PNB organized National Sugar Development Corp. (NASUDECO) to take ownership and possession of the assets and ultimately to nationalize and consolidate its interest in other PNB controlled sugar mills. Prior to being acquired by PNB, PASUMIL engaged the services of respondent for electrical rewinding and repair, most of which were partially paid by the defendant PASUMIL. The respondent demanded the payment of the unpaid balance from PNB and NASUDECO but the latter refused to pay.

ISSUE: Whether or not the petitioners are liable for the debts of PASUMIL?

RULING: No. Piercing the veil of corporate fiction may be allowed only if the following elements concur: (1) control -- not mere stock control, but complete domination -- not only of finances, but of policy and business practice in respect to the transaction attacked, must have been such that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own; (2) such control must have been used by the defendant to commit a fraud or a wrong to perpetuate the violation of a statutory or other positive legal duty, or a dishonest and an unjust act in contravention of plaintiffs legal right; and (3) the said control and breach of duty must have proximately caused the injury or unjust loss complained of. The foregoing elements are absent in the present case and therefore precludes the piercing of the corporate veil. First, other than the fact that petitioners acquired the assets of PASUMIL, there is no showing that their control over it warrants the disregard of corporate personalities. Second, there is no evidence that their juridical personality was used to commit a fraud or to do a wrong; or that the separate corporate entity was farcically used as a mere alter ego, business conduit or instrumentality of another entity or person. Third, respondent was not defrauded or injured when petitioners acquired the assets of PASUMIL.

DE LEON VS. NLRC

FACTS: Fortune Tobacco Corporation (FTC) and Fortune Integrated Services, Inc. (FISI) entered into a contract for security services where the latter undertook to provide security guards for the protection and security of the former. The petitioners were among those engaged as security guards pursuant to the contract. Thereafter, the incorporators and stockholders of FISI sold out stocks to a group of new stockholders. On the same date, the Articles of Incorporation of FISI was amended changing its corporate name to Magnum Integrated Services, Inc. (MISI). FTC terminated the contract for security services which resulted in the displacement of some five hundred eighty two (582) security guards

assigned by FISI/MISI to FTC, including the petitioners in this case thus the petitioners filed a case for illegal dismissal.

ISSUE: Whether or not the doctrine of piercing the veil of corporate fiction should be applied? RULING: Yes, the doctrine of piercing the corporate veil should be applied to hold all respondents liable for unfair labor practice and illegal termination of petitioners' employment. When the concept of separate 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, or in case of two corporations, merge them into one. The separate juridical personality of a corporation may also be disregarded when such corporation is a mere alter ego or business conduit of another person. In the case at bar, it was shown that FISI was a mere adjunct of FTC. FISI, by virtue of a contract for security services, provided FTC with security guards to safeguard its premises. However, records show that FISI and FTC have the same owners and business address, and FISI provided security services only to FTC and other companies belonging to the Lucio Tan group of companies. The purported sale of the shares of the former stockholders to a new set of stockholders who changed the name of the corporation to Magnum Integrated Services, Inc. appears to be part of a scheme to terminate the services of FISI's security guards posted at the premises of FTC and bust their newly-organized union which was then beginning to become active in demanding the company's compliance with Labor Standards laws. Under these circumstances, the Court cannot allow FTC to use its separate corporate personality to shield itself from liability for illegal acts committed against its employees.