Concept Builders Inc.
vs National Labor Relations personality is used to defeat public convenience, justify wrong,
Commission
Facts: Petitioner Concept Builders Inc., a domestic corporation
with principal office at 355 Maysan Road, Valenzuela, Metro
Manila is engaged in the construction business. Private
respondents were employed by said company as laborers,
carpenters, and niggers. On November 1981, private respondents
were served with individual written notices of termination of
employment by petitioner, effective on November 30, 1981. It was
stated in the individual notices that their contracts of employment
had expired and the project in which they were hired had been
completed. Public respondent found it to be the fact, however, at
the time of the termination of private respondents’ employment,
the project in which they were hired had not yet been finished and
completed. Petitioner had to engage the services of the
subcontractors whose workers performed the functions of private
respondents. Aggrieved, private respondents filed a complaint for
illegal dismissal, unfair labor practices and non-payment of their
holiday pay, overtime pay, and 13th month pay against
petitioners. The labor arbiter rendered decision in favor of the
private respondents. When the same became final and executory,
a writ of execution was issued, however, the same was refused by
the security guard on duty on the ground that the petitioners no
longer occupied the premises. A break-open order was then
recommended.
Issue: Whether or not the alias writ of execution can be issued
against the sister company of the petitioners, HPPI.
Held: Yes. It is a fundamental principle of corporation law that a
corporation is an entity separate and distinct from its
stockholders and from other corporations to which it may be
connected. But, this separate and distinct personality of a
corporation is merely a fiction created by law for convenience and
to promote justice. So, when the notion of separate juridical
protect fraud, or defend crime, or is used as a device to defeat
labor laws, this separate personality of the corporation may be
disregarded or the veil of corporate fiction pierced. This is true
likewise when the corporation is merely an adjunct, a business
conduit or an alter ego of another corporation.
The conditions under which the juridical entity may be
disregarded vary according to the peculiar facts and in
circumstances laid down, but certainly there are some probative
factors of identity that will justify the application of the doctrine
of piercing the corporate veil, to wit:
1. Stock ownership by one or common ownership of both
corporations.
2. Identity of directors and officers.
3. The names of keeping corporate books and records
4. Methods of conducting the business.
Where one corporation is so organized and controlled and its
affairs are conducted so that, it is in fact, a mere instrumentality
or adjunct of the other, the fiction of the corporate entity of the
instrumentality may be disregarded. The control necessary to
invoke the rule is not majority or even complete stock control but
such domination of instances, policies and practices that the
controlled corporation has, so to speak, no separate mind, will or
existence of its own and is but a conduit for its principal. It must
be kept in mind that the control must be shown to have been
exercised at the time the acts complained of took place. Moreover,
the control and breach of duty must proximately cause the injury
or unjust loss for which the complaint is made.
The test in determining the applicability of the doctrine of
piercing the veil of corporate fiction as follows:
 1. Control, not mere majority or complete stock control but August 1, 1997 3,361,494.96
complete domination, not only of finances but of policy August 14, 1997 980,000.00
and business practice in respect to the transaction August 21, 1997 2,527,200.00
attacked so that the corporate entity as to this transaction August 21, 1997 3,146,715.00
had at the time no separate mind, will on exercise of its September 3, 1997 1,385,511.75
own; Total P24,938,898.08
2. Such control must have been used by the defendant to
commit fraud or wrong, to perpetuate the violation of a These were made pursuant to the Letter-Agreement,4 dated
statutory or other positive legal duty or dishonest and March 23,
unjust act in contravention of plaintiff’s legal rights.
3. The aforesaid control and breach of duty must 1996, between iBank and Hammer, represented by its President
proximately cause the injury or unjust loss complained of. and General Manager, Manuel Chua (Chua) a.k.a. Manuel Chua Uy
Po Tiong, granting Hammer a P 25 Million-Peso Omnibus
The absence of any of these elements prevents “piercing the Line.5 The loans were secured by a P 9 Million-Peso Real Estate
corporate veil” of the corporation. In applying the instrumentality Mortgage6 executed on July 1, 1997 by Goldkey Development
or “alter ego” doctrine, the courts are concerned with reality and Corporation (Goldkey) over several of its properties and a P 25
not form, with how the corporation operated and the individual Million-Peso Surety Agreement7 signed by Chua and his wife, Fe
defendant’s relationship to that operation. Tan Uy (Uy), on April 15, 1996.

HEIRS OF FE TAN UY v. IEB
The Facts
On several occasions, from June 23, 1997 to September 3, 1997,
respondent International Exchange Bank (iBank), granted loans
to Hammer Garments Corporation (Hammer), covered by
promissory notes and deeds of assignment, in the following
amounts:3
As of October 28, 1997, Hammer had an outstanding obligation of
P25,420,177.62 to iBank.8 Hammer defaulted in the payment of its
loans, prompting iBank to foreclose on Goldkey’s third-party Real
Estate Mortgage. The mortgaged properties were sold for P 12
million during the foreclosure sale, leaving an unpaid balance of P
13,420,177.62.9 For failure of Hammer to pay the deficiency,
iBank filed a Complaint10 for sum of money on December 16, 1997
against Hammer, Chua, Uy, and Goldkey before the Regional Trial
Court, Makati City (RTC).11

Despite service of summons, Chua and Hammer did not file their
Date of Promissory Note Amount respective answers and were declared in default. In her separate
June 23, 1997 P 5,599,471.33 answer, Uy claimed that she was not liable to iBank because she
July 24, 1997 2,700,000.00 never executed a surety agreement in favor of iBank. Goldkey, on
July 25, 1997 2,300,000.00 the other hand, also denies liability, averring that it acted only as
August 1, 1997 2,938,505.04 a third-party mortgagor and that it was a corporation separate
and distinct from Hammer.12
 petitioners acted maliciously and in bad faith and used the
Meanwhile, iBank applied for the issuance of a writ of preliminary corporate fiction to defraud iBank, they should be treated as one
attachment which was granted by the RTC in its December 17, and the same as Hammer.17
1997 Order.13
Hence, these petitions filed separately by the heirs of Uy and
The Notice of Levy on Attachment of Real Properties, dated July Goldkey. On February 9, 2005, this Court ordered the
15, 1998, covering the properties under the name of Goldkey, was consolidation of the two cases.18
sent by the sheriff to the Registry of Deeds of Quezon City.14

The RTC, in its Decision,15 dated December 27, 2000, ruled in favor The Issues
of iBank. While it made the pronouncement that the signature of
Uy on the Surety Agreement was a forgery, it nevertheless held Petitioners raise the following issues:
her liable for the outstanding obligation of Hammer because she
was an officer and stockholder of the said corporation. The RTC
agreed with Goldkey that as a third-party mortgagor, its liability Whether or not a trial court, under the facts of this case, can
was limited to the properties mortgaged. It came to the go out of the issues raised by the pleadings;19
conclusion, however, that Goldkey and Hammer were one and the
same entity for the following reasons: (1) both were family Whether or not there is guilt by association in those cases
corporations of Chua and Uy, with Chua as the President and Chief where the veil of corporate fiction may be pierced;20 and
Operating Officer; (2) both corporations shared the same office
and transacted business from the same place, (3) the assets of Whether or not the “alter ego” theory in disregarding the
Hammer and Goldkey were co-mingled; and (4) when Chua corporate personality of a corporation is applicable to
absconded, both Hammer and Goldkey ceased to operate. As such, Goldkey.21
the piercing of the veil of corporate fiction was warranted. Uy, as
an officer and stockholder of Hammer and Goldkey, was found Simplifying the issues in this case, the Court must resolve the
liable to iBank together with Chua, Hammer and Goldkey for the following: (1) whether Uy can be held liable to iBank for the loan
deficiency of P13,420,177.62. obligation of Hammer as an officer and stockholder of the said
corporation; and (2) whether Goldkey can be held liable for the
Aggrieved, the heirs of Uy and Goldkey (petitioners) elevated the obligation of Hammer for being a mere alter ego of the latter.
case to the CA. On August 16, 2004, it promulgated its decision
affirming the findings of the RTC. The CA found that iBank was not
negligent in evaluating the financial stability of Hammer. The Court’s Ruling
According to the appellate court, iBank was induced to grant the
loan because petitioners, with intent to defraud the bank,
submitted a falsified Financial Report for 1996 which incorrectly The petitions are partly meritorious.
declared the assets and cashflow of Hammer.16 Because
 severally for all damages resulting therefrom suffered by the
Uy is not liable; The piercing of the corporation, its stockholders or members and other persons.
veil of corporate fiction is not justified
Solidary liability will then attach to the directors, officers or
The heirs of Uy argue that the latter could not be held liable for employees of the corporation in certain circumstances, such as:
being merely an officer of Hammer and Goldkey because it was
not shown that she had committed any actionable wrong22 or that
she had participated in the transaction between Hammer and 1. When directors and trustees or, in appropriate cases, the
iBank. They further claim that she had cut all ties with Hammer officers of a corporation: (a) vote for or assent to patently
and her husband long before the execution of the loan.23 unlawful acts of the corporation; (b) act in bad faith or with gross
negligence in directing the corporate affairs; and (c) are guilty of
The Court finds in favor of Uy. conflict of interest to the prejudice of the corporation, its
stockholders or members, and other persons;
Basic is the rule in corporation law that a corporation is a juridical
entity which is vested with a legal personality separate and 2. When a director or officer has consented to the issuance of
distinct from those acting for and in its behalf and, in general, from watered stocks or who, having knowledge thereof, did not
the people comprising it. Following this principle, obligations forthwith file with the corporate secretary his written objection
incurred by the corporation, acting through its directors, officers thereto;
and employees, are its sole liabilities. A director, officer or
employee of a corporation is generally not held personally liable 3. When a director, trustee or officer has contractually agreed or
for obligations incurred by the corporation.24 Nevertheless, this stipulated to hold himself personally and solidarily liable with the
legal fiction may be disregarded if it is used as a means to corporation; or
perpetrate fraud or an illegal act, or as a vehicle for the evasion of
an existing obligation, the circumvention of statutes, or to confuse 4. When a director, trustee or officer is made, by specific provision
legitimate issues.25 of law, personally liable for his corporate action.26
This is consistent with the provisions of the Corporation Code of
the Philippines, which states: Before a director or officer of a corporation can be held personally
liable for corporate obligations, however, the following requisites
must concur: (1) the complainant must allege in the complaint
Sec. 31. Liability of directors, trustees or officers. – Directors or that the director or officer assented to patently unlawful acts of
trustees who wilfully and knowingly vote for or assent to patently the corporation, or that the officer was guilty of gross negligence
unlawful acts of the corporation or who are guilty of gross or bad faith; and (2) the complainant must clearly and
negligence or bad faith in directing the affairs of the corporation convincingly prove such unlawful acts, negligence or bad faith.27
or acquire any personal or pecuniary interest in conflict with their
duty as such directors or trustees shall be liable jointly and While it is true that the determination of the existence of any of
the circumstances that would warrant the piercing of the veil of
corporate fiction is a question of fact which cannot be the subject
of a petition for review on certiorari under Rule 45, this Court can
take cognizance of factual issues if the findings of the lower court
are not supported by the evidence on record or are based on a
misapprehension of facts.28
In this case, petitioners are correct to argue that it was not alleged,
much less proven, that Uy committed an act as an officer of
Hammer that would permit the piercing of the corporate veil. A
reading of the complaint reveals that with regard to Uy, iBank did
not demand that she be held liable for the obligations of Hammer
because she was a corporate officer who committed bad faith or
gross negligence in the performance of her duties such that the
lifting of the corporate mask would be merited. What the
complaint simply stated is that she, together with her errant
husband Chua, acted as surety of Hammer, as evidenced by her
signature on the Surety Agreement which was later found by the
RTC to have been forged.29
Considering that the only basis for holding Uy liable for the
payment of the loan was proven to be a falsified document, there
was no sufficient justification for the RTC to have ruled that Uy
should be held jointly and severally liable to iBank for the unpaid
loan of Hammer. Neither did the CA explain its affirmation of the
RTC’s ruling against Uy. The Court cannot give credence to the
simplistic declaration of the RTC that liability would attach
directly to Uy for the sole reason that she was an officer and
stockholder of Hammer.
At most, Uy could have been charged with negligence in the
performance of her duties as treasurer of Hammer by allowing the
company to contract a loan despite its precarious financial
position. Furthermore, if it was true, as petitioners claim, that she
no longer performed the functions of a treasurer, then she should
have formally resigned as treasurer to isolate herself from any
liability that could result from her being an officer of the
corporation. Nonetheless, these shortcomings of Uy are not
sufficient to justify the piercing of the corporate veil which
requires that the negligence of the officer must be so gross that it
could amount to bad faith and must be established by clear and
convincing evidence. Gross negligence is one that is characterized
by the lack of the slightest care, acting or failing to act in a situation
where there is a duty to act, wilfully and intentionally with a
conscious indifference to the consequences insofar as other
persons may be affected.30
It behooves this Court to emphasize that the piercing of the veil of
corporate fiction is frowned upon and can only be done if it has
been clearly established that the separate and distinct personality
of the corporation is used to justify a wrong, protect fraud, or
perpetrate a deception.31 As aptly explained in Philippine National
Bank v. Andrada Electric & Engineering Company:32
Hence, any application of the doctrine of piercing the corporate
veil should be done with caution. A court should be mindful of the
milieu where it is to be applied. It must be certain that the
corporate fiction was misused to such an extent that injustice,
fraud, or crime was committed against another, in disregard of its
rights. The wrongdoing must be clearly and convincingly
established; it cannot be presumed. Otherwise, an injustice that
was never unintended may result from an erroneous
application.33
Indeed, there is no showing that Uy committed gross negligence.
And in the absence of any of the aforementioned requisites for
making a corporate officer, director or stockholder personally
liable for the obligations of a corporation, Uy, as a treasurer and
stockholder of Hammer, cannot be made to answer for the unpaid
debts of the corporation.
 cannot, at this late stage, question the due execution of the third-
Goldkey is a mere alter ego of Hammer party mortgage.

Goldkey contends that it cannot be held responsible for the
obligations of its stockholder, Chua.34Moreover, it theorizes that
iBank is estopped from expanding Goldkey’s liability beyond the
real estate mortgage.35 It adds that it did not authorize the
execution of the said mortgage.36 Finally, it passes the blame on to
iBank for failing to exercise the requisite due diligence in properly
evaluating Hammer’s creditworthiness before it was extended an
omnibus line.37
Similarly, Goldkey is undoubtedly mistaken in claiming that iBank
is seeking to enforce an obligation of Chua. The records clearly
show that it was Hammer, of which Chua was the president and a
stockholder, which contracted a loan from iBank. What iBank
sought was redress from Goldkey by demanding that the veil of
corporate fiction be lifted so that it could not raise the defense of
having a separate juridical personality to evade liability for the
obligations of Hammer.

The Court disagrees with Goldkey. Under a variation of the doctrine of piercing the veil of corporate
fiction, when two business enterprises are owned, conducted and
There is no reason to discount the findings of the CA that iBank controlled by the same parties, both law and equity will, when
duly inspected the viability of Hammer and satisfied itself that the necessary to protect the rights of third parties, disregard the legal
latter was a good credit risk based on the Financial Statement fiction that two corporations are distinct entities and treat them
submitted. In addition, iBank required that the loan be secured by as identical or one and the same.39
Goldkey’s Real Estate Mortgage and the Surety Agreement with
Chua and Uy. The records support the factual conclusions made While the conditions for the disregard of the juridical entity may
by the RTC and the CA. vary, the following are some probative factors of identity that will
justify the application of the doctrine of piercing the corporate
To the Court’s mind, Goldkey’s argument, that iBank is barred veil, as laid down in Concept Builders, Inc. v NLRC:40
from pursuing Goldkey for the satisfaction of the unpaid
obligation of Hammer because it had already limited its liability to
the real estate mortgage, is completely absurd. Goldkey needs to (1) Stock ownership by one or common ownership of both
be reminded that it is being sued not as a consequence of the real corporations;
estate mortgage, but rather, because it acted as an alter ego of (2) Identity of directors and officers;
Hammer. Accordingly, they must be treated as one and the same (3) The manner of keeping corporate books and records, and
entity, making Goldkey accountable for the debts of Hammer. (4) Methods of conducting the business.41

In fact, it is Goldkey who is now precluded from denying the These factors are unquestionably present in the case of Goldkey
validity of the Real Estate Mortgage. In its Answer with and
Affirmative Defenses and Compulsory Counterclaim, dated
January 5, 1998, it already admitted that it acted as a third-party Hammer, as observed by the RTC, as follows:
mortgagor to secure the obligation of Hammer to iBank.38 Thus, it

1. Both corporations are family corporations of defendants
Manuel Chua and his wife Fe Tan Uy. The other incorporators and
shareholders of the two corporations are the brother and sister of
Manuel Chua (Benito Ng Po Hing and Nenita Chua Tan) and the
sister of Fe Tan Uy, Milagros Revilla. The other
incorporator/share holder is Manling Uy, the daughter of Manuel
Chua Uy Po Tiong and Fe Tan Uy.
The stockholders of Hammer Garments as of March 23, 1987,
aside from spouses Manuel and Fe Tan Uy are: Benito Chua,
brother Manuel Chua, Nenita Chua Tan, sister of Manuel Chua and
Tessie See Chua Tan. On March 8, 1988, the shares of Tessie See
Chua Uy were assigned to Milagros T. Revilla, thereby
consolidating the shares in the family of Manuel Chua and Fe Tan
Uy.
2. Hammer Garments and Goldkey share the same office and
practically transact their business from the same place.
3. Defendant Manuel Chua is the President and Chief Operating
Officer of both corporations. All business transactions of Goldkey
and Hammer are done at the instance of defendant Manuel Chua
who is authorized to do so by the corporations.
The promissory notes subject of this complaint are signed by him
as Hammer’s President and General Manager. The third-party real
estate mortgage of defendant Goldkey is signed by him for
Goldkey to secure the loan obligation of Hammer Garments
withplaintiff "iBank''. The other third-party real estate mortgages
which Goldkey executed in favor of the other creditor banks of
Hammer are also signed by Manuel Chua.
4. The assets of Goldkey and Hammer are co-mingled. The real
properties of Goldkey are mortgaged to secure Hammer's
obligation with creditor hanks.
The proceeds of at least two loans which Hammer obtained from
plaintiff "iBank", purportedly to finance its export to WalMart are
instead used to finance the purchase of a manager's check payable
to Goldkey. The defendants' claim that Goldkey is a creditor of
Hammer to justify its receipt of the Manager's cheek is not
substantiated by evidence. Despite subpoenas issued by this
Court, Goldkey thru its treasurer, defendant Fe Tan Uy and or its
corporate secretary Manling Uy failed to produce the Financial
Statement of Goldke.
5. When defendant Manuel Chua "disappeared", the defendant
Goldkey ceased to operate despite the claim that the other
"officers" and stockholders like Benito Chua, Nenita Chua Tan, Fe
Tan Uy, Manling Uy and Milagros T. Revilla are still around and
may be able to continue the business of Goldkey, if it were
different or distinct from Hammer which suffered financial set
back.42
Based on the foregoing findings of the RTC, it was apparent that
Goldkey was merely an adjunct of Hammer and, as such, the legal
fiction that it has a separate personality from that of Hammer
should be brushed aside as they are, undeniably, one and the
same.
WHEREFORE, the petitions are PARTLY GRANTED. The August
16, 2004 Decision and the December 2, 2004 Resolution of the
Court of Appeals, in CA-G.R. CV No. 69817, are
hereby MODIFIED. Fe Tan Uy is released from any liability arising
from the debts incurred by Hammer from iBank. Hammer
Garments Corporation, Manuel Chua Uy Po Tiong and Goldkey
Development Corporation are jointly and severally liable to pay
International Exchange Bank the sum of P13,420,177.62
representing the unpaid loan obligation of Hammer as of
December 12, 1997 plus interest. No costs.
PNB v. HYDRO RESOURCES
FACTS: Sometime in 1984, petitioners DBP and PNB foreclosed on
certain mortgages made on the properties of Marinduque Mining
and Industrial Corporation (MMIC). As a result of the foreclosure,
DBP and PNB acquired substantially all the assets of MMIC and
resumed the business operations of the defunct MMIC by
organizing NMIC.7 DBP and PNB owned 57% and 43% of the
shares of NMIC, respectively, except for five qualifying shares. As
of September 1984, the members of the Board of Directors of
NMIC, namely, Jose Tengco, Jr., Rolando Zosa, Ruben Ancheta,
Geraldo Agulto, and Faustino Agbada, were either from DBP or
PNB.
Subsequently, NMIC engaged the services of Hercon, Inc., for
NMIC’s Mine Stripping and Road Construction Program in 1985
for a total contract price of P35,770,120. After computing the
payments already made by NMIC under the program and crediting
the NMIC’s receivables from
Hercon, Inc., the latter found that NMIC still has an unpaid balance
of P8,370,934.74.10 Hercon, Inc. made several demands on NMIC,
including a letter of final demand dated August 12, 1986, and
when these were not heeded, a complaint for sum of money was
filed in the RTC of Makati, Branch 136 seeking to hold petitioners
NMIC, DBP, and PNB solidarily liable for the amount owing
Hercon, Inc.
Subsequent to the filing of the complaint, Hercon, Inc. was
acquired by HRCC in a merger.
Thereafter, on December 8, 1986, then President Corazon C.
Aquino issued Proclamation No. 50 creating the APT for the
expeditious disposition and privatization of certain government
corporations and/or the assets thereof. Pursuant to the said
Proclamation, on February 27, 1987, DBP and PNB executed their
respective deeds of transfer in favor of the National Government
assigning, transferring and conveying certain assets and
liabilities, including their respective stakes in NMIC. In turn and
on even date, the National Government transferred the said assets
and liabilities to the APT as trustee under a Trust Agreement.
ISSUE: Whether or not there is sufficient ground to pierce the veil
of corporate fiction of NMIC and held DBP and PNB solidarily
liable with NMIC?
RULING: No. From all indications, it appears that NMIC is a mere
adjunct, business conduit or alter ego of both DBP and PNB. Thus,
the DBP and PNB are jointly and severally liable with NMIC for the
latter’s unpaid obligations to plaintiff.
Then concluded that, "in keeping with the concept of justice and
fair play," the corporate veil of NMIC should be pierced.
For to treat NMIC as a separate legal entity from DBP and PNB for
the purpose of securing beneficial contracts, and then using such
separate entity to evade the payment of a just debt, would be the
height of injustice and iniquity. Surely that could not have been
the intendment of the law with respect to corporations.
The doctrine of piercing the corporate veil applies only in three
(3) basic areas, namely: 1) defeat of public convenience as when
the corporate fiction is used as a vehicle for the evasion of an
existing obligation; 2) fraud cases or when the corporate entity is
used to justify a wrong, protect fraud, or defend a crime; or 3) alter
ego cases, where a corporation is merely a farce since it is a mere
alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs are so
conducted as to make it merely an instrumentality, agency,
conduit or adjunct of another corporation.
PNB v. RITRATTO GROUP INC.
FACTS:
 May 29, 1996: PNB International Finance Ltd. (PNB-IFL) a
subsidiary company of PNB, organized and doing business in
Hong Kong, extended a letter of credit in favor of the Ritratto
Group, Inc. (Ritartto) in the amount of US$300K secured by
real estate mortgages constituted over 4 parcels of land in
Makati City
 September 1996: increased successively to US$1,140,000.00
 November 1996: to US$1,290,000.00
 February 1997: US$1,425,000.00
 April 1998: decreased to US$1,421,316.18
 Ritratto Group, Inc. made repayments of the loan incurred by
remitting those amounts to their loan account with PNB-IFL
in Hong Kong.
 April 30, 1998: outstanding amounted to US$1,497,274.70
 PNB-IFL, through its attorney-in-fact PNB, notified them of
the foreclosure of all the real estate mortgages and that the
properties subjected
 May 25, 1999: Ritratto Group, Inc filed a complaint for
injunction with prayer for the issuance of a writ of
preliminary injunction and/or temporary restraining order
before the RTC. -granted 72-hour TRO
 RTC and CA: dismissed motion to dismiss
 PNB-IFL, is a wholly owned subsidiary of defendant
Philippine National Bank, the suit against the defendant PNB
is a suit against PNB-IFL
 Rittratto: entire credit facility is void as it contains
stipulations in violation of the principle of mutuality of
contracts
ISSUE: W/N PNB is an alter ego of PNB-IFL
HELD: NO. Petition is granted
 PNB is an agent with limited authority and specific duties
under a special power of attorney incorporated in the real
estate mortgage.
 not privy to the loan contracts entered into by PNB-IFL.
 mere fact that a corporation owns all of the stocks of another
corporation, taken alone is not sufficient to justify their being
treated as one entity.
 If used to perform legitimate functions, a subsidiary's
separate existence may be respected, and the liability of the
parent corporation as well as the subsidiary will be confined
to those arising in their respective business.
 general rule the stock ownership alone by one corporation of
the stock of another does not thereby render the dominant
corporation liable for the torts of the subsidiary unless the
 separate corporate existence of the subsidiary is a mere sham,
or unless the control of the subsidiary is such that it is but an
instrumentality or adjunct of the dominant corporation.
 The Circumstance rendering the subsidiary an
instrumentality (common circumstances)
(a) The parent corporation owns all or most of the capital stock of
the subsidiary.
(b) The parent and subsidiary corporations have common
directors or officers.
(c) The parent corporation finances the subsidiary.
(d) The parent corporation subscribes to all the capital stock of
the subsidiary or otherwise causes its incorporation.
(e) The subsidiary has grossly inadequate capital.
(f) The parent corporation pays the salaries and other expenses
or losses of the subsidiary.
(g) The subsidiary has substantially no business except with the
parent corporation or no assets except those conveyed to or by
the parent corporation.
(h) In the papers of the parent corporation or in the statements of
its officers, the subsidiary is described as a department or division
of the parent corporation, or its business or financial
responsibility is referred to as the parent corporation's own.
(i) The parent corporation uses the property of the subsidiary as
its own.
(j) The directors or executives of the subsidiary do not act
independently in the interest of the subsidiary but take their
orders from the parent corporation.
(k) The formal legal requirements of the subsidiary are not
observed.
SAVERIO v. PUYAT
FACTS: On July 22, 1996, Alfonso Puyat granted a loan to NSI. The
loan was made pursuant to the Memorandum of Agreement and
Promissory Note (MOA) between the Puyat and NSI, represented
by Nuccio Saverio. It was agreed that the respondent would
extend a credit line with a limit of P500,000.00 to NSI, to be paid
within thirty (30) days from the time of the signing of the
document. The loan carried an interest rate of 17% per annum, or
at an adjusted rate of 25% per annum if payment is beyond the
stipulated period. The petitioners received a total amount of
P300,000.00 and certain machineries intended for their fertilizer
processing plant business. The proposed business, however,
failed to materialize. On several occasions, Nuccio made personal
payments amounting to P600,000.00. However, as of December
16, 1999, the petitioners allegedly had an outstanding balance of
P460,505.86. When the petitioners defaulted in the payment of
the loan, the respondent filed a collection suit with the RTC,
alleging mainly that the petitioners still owe him the value of the
machineries as shown by the Breakdown of Account he presented.
The petitioners refuted the respondent’s allegation and insisted
that they have already paid the loan, evidenced by the
respondent’s receipt for the amount of P600,000.00. They
submitted that their remaining obligation to pay the machineries’
value, if any, had long been extinguished by their business’ failure
to materialize. They posited that, even assuming without
conceding that they are liable, the amount being claimed is
inaccurate, the penalty and the interest imposed are
unconscionable, and an independent accounting is needed to
determine the exact amount of their liability. In its decision dated
December 15, 2004, the RTC found that aside from the cash loan,
the petitioners’ obligation to the respondent also covered the
payment of the machineries’ value. The RTC also found merit in
the respondent’s contention that the petitioners are one and the
same. The RTC, moreover, concluded that the interest rates
stipulated in the MOA were not usurious and that the respondent
is entitled to attorney’s fees on account of the petitioner’s willful
breach of the loan obligation. The petitioners appealed the RTC
ruling to the CA. There, they argued that in view of the lack of
proper accounting and the respondent’s failure to substantiate his
claims, the exact amount of their indebtedness had not been
proven. Nuccio also argued that by virtue of NSI’s separate and
distinct personality, he cannot be made solidarily liable with NSI.
On October 27, 2008, the CA rendered a decision declaring the
petitioners jointly and severally liable for the amount that the
respondent sought. The CA also affirmed the RTC ruling that
petitioners are one and the same. In a petition for review on
certiorari to the Supreme Court, petitioners submit that the CA
gravely erred in ruling that a proper accounting was not
necessary. They also point to the absence of the award’s
computation in the RTC ruling, arguing that assuming they are still
indebted to the respondent, the specific amount of their
indebtedness remains undetermined, thus the need for an
accounting to determine their exact liability. They further
question the CA’s findings of solidary liability. They submit that in
the absence of any showing that corporate fiction was used to
defeat public convenience, justify a wrong, protect fraud or defend
a crime, or where the corporation is a mere alter ego or business
conduit of a person, Nuccio’s mere ownership of forty percent
(40%) does not justify the piercing of the separate and distinct
personality of NSI.
ISSUE: Whether the CA committed a reversible error in affirming
the RTC’s decision holding the petitioners jointly and severally
liable for the amount claimed.
RULING: 1. The SC held that a remand of the case to the court of
origin for a complete accounting and determination of the actual
amount of the petitioner’s indebtedness is called for.
2. Piercing of the corporate veil is not justified. The petitioners are
not one and the same. NSI’s liability should not attach to
Nuccio.
3. Respondent’s entitlement to attorney’s fees is justified.
RATIONALE: 1. While the fact of indebtedness by the petitioner is
undisputed, the determination of the extent of the adjudged
money award is not, because of the lack of any supporting
documentary and testimonial evidence. It is a settled rule that in
the exercise of the Supreme Court’s power of review, the Court is
not a trier of facts and does not normally undertake the re-
examination of the evidence presented by the contending parties
during the trial of the case considering that the findings of facts of
the CA are conclusive and binding on the Court. However, the
Court had recognized several exceptions to this rule, to wit: when
the findings are grounded entirely on speculation, surmises or
conjectures
2. Before the corporate fiction can be disregarded, alter-ego
elements must first be sufficiently established. The records of the
case, however, do not show that Nuccio had control or domination
over NSI’s finances. While Nuccio was the signatory of the loan
and the money was delivered to him, the proceeds of the loan
were unquestionably intended for NSI’s proposed business plan.
That the business did not materialize is not also sufficient proof to
justify a piercing, in the absence of proof that the business plan
was a fraudulent scheme geared to secure funds from the
respondent for the petitioner’s undisclosed goals.
3. There is no doubt that respondent was forced to litigate to
protect his interest, i.e., to recover his money. The SC found,
however, that in view of the partial payment of P600,000.00, the
award of attorney’s fees equivalent to 25% should be reduced to
10% of the total amount due. The award of appearance fee of
P3,000.00 and litigation cost of P10,000.00 should, however,
stand as these are costs necessarily attendant to litigation.
COC v. OILINK INTERNATIONAL
Antecedents

The antecedents are summarized in the assailed decision.[2]
On September 15, 1966, Union Refinery Corporation (URC) was
established under the Corporation Code of the Philippines. In the
course of its business undertakings, particularly in the period
from 1991 to 1994, URC imported oil products into the country.
On January 11, 1996, Oilink was incorporated for the primary
purpose of manufacturing, importing, exporting, buying, selling or
dealing in oil and gas, and their refinements and by-products at
wholesale and retail of petroleum. URC and Oilink had
interlocking directors when Oilink started its business.
In applying for and in expediting the transfer of the operator's
name for the Customs Bonded Warehouse then operated by URC,
Esther Magleo, the Vice-President and General Manager of URC,
sent a letter dated January 15, 1996 to manifest that URC and
Oilink had the same Board of Directors and that Oilink was 100%
owned by URC.
On March 4, 1998, Oscar Brillo, the District Collector of the Port of
Manila, formally demanded that URC pay the taxes and duties on
its oil imports that had arrived between January 6, 1991 and
November 7, 1995 at the Port of Lucanin in Mariveles, Bataan.
On April 16, 1998, Brillo made another demand letter to URC for
the payment of the reduced sum of P289,287,486.60 for the Value-
Added Taxes (VAT), special duties and excise taxes for the years
1991-1995.
On April 23, 1998, URC, through its counsel, responded to the
demands by seeking the landed computations of the assessments,
and challenged the inconsistencies of the demands.
On November 25, 1998, then Customs Commissioner Pedro C.
Mendoza formally directed that URC pay the amount
of P119,223,541.71 representing URC's special duties, VAT, and
Excise Taxes that it had failed to pay at the time of the release of
its 17 oil shipments that had arrived in the Sub-port of Mariveles
from January 1, 1991 to September 7, 1995.
On December 21, 1998, Commissioner Mendoza wrote again to
require URC to pay deficiency taxes but in the reduced sum of
P99,216,580.10.
On December 23, 1998, upon his assumption of office, Customs
Commissioner Nelson Tan transmitted another demand letter to
URC affirming the assessment of P99,216,580.10 by
Commissioner Mendoza.
On January 18, 1999, Magleo, in behalf of URC, replied by letter to
Commissioner Tan's affirmance by denying liability, insisting
instead that only P28,933,079.20 should be paid by way of
compromise.
On March 26, 1999, Commissioner Tan responded by rejecting
Magleo's proposal, and directed URC to pay P99,216,580.10.
On May 24, 1999, Manuel Co, URC's President, conveyed to
Commissioner Tan URC's willingness to pay only P94,216,580.10,
of which the initial amount of P28,264,974.00 would be taken
from the collectibles of Oilink from the National Power
Corporation, and the balance to be paid in monthly installments
over a period of three years to be secured with corresponding
post-dated checks and its future available tax credits.
On July 2, 1999, Commissioner Tan made a final demand for the
total liability of P138,060,200.49 upon URC and Oilink.
On July 8, 1999, Co requested from Commissioner Tan a complete
finding of the facts and law in support of the assessment made in
the latter's July 2, 1999 final demand.
Also on July 8, 1999, Oilink formally protested the assessment on
the ground that it was not the party liable for the assessed
deficiency taxes.
On July 12, 1999, after receiving the July 8, 1999 letter from Co,
Commissioner Tan communicated in writing the detailed
computation of the tax liability, stressing that the Bureau of
Customs (BoC) would not issue any clearance to Oilink unless the
amount of P138,060,200.49 demanded as Oilink's tax liability be
first paid, and a performance bond be posted by URC/Oilink to
secure the payment of any adjustments that would result from
the BIR's review of the liabilities for VAT, excise tax, special duties,
penalties,
Thus, on July 30, 1999, Oilink appealed to the CTA, seeking the
nullification of the assessment for having been issued without
authority and with grave abuse of discretion tantamount to lack
of jurisdiction because the Government was thereby shifting the
imposition from URC to Oilink.
Decision of the CTA
On July 9, 2001, the CTA rendered its decision declaring as null
and void the assessment of the Commissioner of Customs, to wit:
SO ORDERED.[3]
The Commissioner of Customs seasonably filed a motion for
reconsideration,[4] but the CTA denied the motion for lack of
merit.[5]
Judgment of the CA
Aggrieved, the Commissioner of Customs brought a petition for
review in the CA upon the following issues, namely: (a) the CTA
gravely erred in holding that it had jurisdiction over the subject
etc. matter; (b) the CTA gravely erred in holding that Oilink had a
cause of action; and (c) the CTA gravely erred in holding that the
Commissioner of Customs could not pierce the veil of corporate
fiction.
On the issue of the jurisdiction of the CTA, the CA held:
x x x the case at bar is very much within the purview of the
jurisdiction of the Court of Tax Appeals since it is undisputed that
what is involved herein is the respondent's liability for payment
of money to the Government as evidenced by the demand letters
sent by the petitioner. Hence, the Court of Tax Appeals did not err
in taking cognizance of the petition for review filed by the
respondent.

IN THE LIGHT OF ALL THE FOREGOING, the petition is hereby x x x x

GRANTED. The assailed assessment issued by Respondent against
We find the petitioner's submission untenable. The principle of
herein Petitioner OILINK INTERNATIONAL CORPORATION is non-exhaustion of administrative remedy is not an iron-clad rule
hereby declared NULL and VOID. for there are instances that immediate resort to judicial action
may be proper. Verily, a cursory examination of the factual milieu
of the instant case indeed reveals that exhaustion of
administrative remedy would be unavailing because it was the We affirm the judgment of the CA.
Commissioner of Customs himself who was demanding from the
respondent payment of tax liability. In addition, it may be recalled
that a crucial issue in the petition for review filed by the 1.
respondent before the CTA is whether or not the doctrine of The CTA had jurisdiction over the controversy
piercing the veil of corporate fiction validly applies. Indubitably,
this is purely a question of law where judicial recourse may There is no question that the CTA had the jurisdiction over the
certainly be resorted to.[6] case. Republic Act No. 1125, the law creating the CTA, defined the
appellate jurisdiction of the CTA as follows:
As to whether or not the Commissioner of Customs could lawfully
pierce the veil of corporate fiction in order to treat Oilink as the Section 7. Jurisdiction. - The Court of Tax Appeals shall exercise
mere alter ego of URC, the CA concurred with the CTA, quoting the exclusive appellate jurisdiction to review by appeal, as herein
latter's following findings: provided:

x x x x
In the case at bar, the said wrongdoing was not clearly and
convincingly established by Respondent. He did not submit any 2. Decisions of the Commissioner of Customs in cases involving
evidence to support his allegations but merely submitted the case liability for Customs duties, fees or other money charges; seizure,
for decision based on the pleadings and evidence presented by detention or release of property affected; fines, forfeitures or
petitioner. Stated otherwise, should the Respondent sufficiently other penalties imposed in relation thereto; or other matters
prove that OILINK was merely set up in order to avoid arising under the Customs Law or other law or part of law
the payment of taxes or for some other purpose which will defeat administered by the Bureau of Customs;
public convenience, justify wrong, protect fraud or defend crime,
this Court will not hesitate to pierce the veil of corporate fiction xxxx
by URC and OILINK.[7]

Nonetheless, the Commissioner of Customs contends that the CTA

should not take cognizance of the case because of the lapse of the
Issues 30-day period within which to appeal, arguing that on November
25, 1998 URC had already received the BoC's final assessment
Hence, this appeal, whereby the Commissioner of Customs demanding payment of the amount due within 10 days, but filed
reiterates the issues raised in the CA. the petition only on July 30, 1999.[8]

We rule against the Commissioner of Customs. The CTA correctly

Ruling of the Court
ruled that the reckoning date for Oilink's appeal was July 12, 1999,
not July 2, 1999, because it was on the former date that the
Commissioner of Customs denied the protest of Oilink. Clearly, the
filing of the petition on July 30, 1999 by Oilink was well within its
reglementary period to appeal. The insistence by the
Commissioner of Customs on reckoning the reglementary period
to appeal from November 25, 1998, the date when URC received
the final demand letter, is unwarranted. We note that the
November 25, 1998 final demand letter of the BoC was addressed
to URC, not to Oilink. As such, the final demand sent to URC did not
bind Oilink unless the separate identities of the corporations were
disregarded in order to consider them as one.
2.
Oilink had a valid cause of action
The Commissioner of Customs posits that the final demand letter
dated July 2, 1999 from which Oilink appealed was not the final
"action" or "ruling" from which an appeal could be taken as
contemplated by Section 2402 of the Tariff and Customs Code;
that what Section 7 of RA No. 1125 referred to as a decision that
was appealable to the CTA was a judgment or order of the
Commissioner of Customs that was final in nature, not merely an
interlocutory one; that Oilink did not exhaust its administrative
remedies under Section 2308 of the Tariff and Customs Code by
paying the assessment under protest; that only when the ensuing
decision of the Collector and then the adverse decision of the
Commissioner of Customs would it be proper for Oilink to seek
judicial relief from the CTA; and that, accordingly, the CTA should
have dismissed the petition for lack of cause of action.
The position of the Commissioner of Customs lacks merit.
The CA correctly held that the principle of non-exhaustion of
administrative remedies was not an iron-clad rule because there
were instances in which the immediate resort to judicial action
was proper. This was one such exceptional instance when the
principle did not apply. As the records indicate, the Commissioner
of Customs already decided to deny the protest by Oilink on July
12, 1999, and stressed then that the demand to pay was final. In
that instance, the exhaustion of administrative remedies would
have been an exercise in futility because it was already the
Commissioner of Customs demanding the payment of the
deficiency taxes and duties.
3.
There was no ground to pierce
the veil of corporate existence
A corporation, upon coming into existence, is invested by law with
a personality separate and distinct from those of the persons
composing it as well as from any other legal entity to which it may
be related. For this reason, a stockholder is generally not made to
answer for the acts or liabilities of the corporation, and vice versa.
The separate and distinct personality of the corporation is,
however, a mere fiction established by law for convenience and to
promote the ends of justice. It may not be used or invoked for ends
that subvert the policy and purpose behind its establishment, or
intended by law to which the corporation owes its being. This is
true particularly when the fiction is used to defeat public
convenience, to justify wrong, to protect fraud, to defend crime, to
confuse legitimate legal or judicial issues, to perpetrate deception
or otherwise to circumvent the law. This is likewise true where
the corporate entity is being used as an alter ego, adjunct, or
business conduit for the sole benefit of the stockholders or of
another corporate entity. In such instances, the veil of corporate
entity will be pierced or disregarded with reference to the
particular transaction involved.[9]
In Philippine National Bank v. Ritratto Group, Inc.,[10] the Court has
outlined the following circumstances that are useful in the
determination of whether a subsidiary is a mere instrumentality
of the parent-corporation, viz:
1. Control, not mere majority or complete control, but complete
domination, not only of finances but of policy and business
practice in respect to the transaction attacked so that the
corporate entity as to this transaction had at the time no separate
mind, will or existence of its own;
2. Such control must have been used by the defendant to commit
fraud or wrong, to perpetrate 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 applying the "instrumentality" or "alter ego" doctrine, the
courts are concerned with reality, not form, and with how the
corporation operated and the individual defendant's relationship
to the operation.[11] Consequently, the absence of any one of the
foregoing elements disauthorizes the piercing of the corporate
veil.
Indeed, the doctrine of piercing the corporate veil has no
application here because the Commissioner of Customs did not
establish that Oilink had been set up to avoid the payment of taxes
or duties, or for purposes that would defeat public convenience,
justify wrong, protect fraud, defend crime, confuse legitimate legal
or judicial issues, perpetrate deception or otherwise circumvent
the law. It is also noteworthy that from the outset the
Commissioner of Customs sought to collect the deficiency taxes
and duties from URC, and that it was only on July 2, 1999 when
the Commissioner of Customs sent the demand letter to both URC
and Oilink. That was revealing, because the failure of the
Commissioner of Customs to pursue the remedies against Oilink
from the outset manifested that its belated pursuit of Oilink was
only an afterthought.
WPM INTERNATIONAL v. LABAYEN
Facts:
 The petitioner, WPM International Trading, Inc. (WPM), is
a domestic corporation engaged in the restaurant
business, while Warlito P. Manlapaz is its president.
 Sometime in 1990, WPM entered into a management
agreement with Labayen, by virtue of which the
respondent was authorized to operate, manage and
rehabilitate Quickbite, a restaurant owned and operated
by WPM. As part of her tasks, the respondent looked for a
contractor who would renovate the two existing Quickbite
outlets in Divisoria, Manila and Lepanto St., University
Belt, Manila. Pursuant to the agreement, the respondent
engaged the services of CLN Engineering Services (CLN) to
renovate Quickbite-Divisoria at the cost of P432,876.02.
 On June 13, 1990, Quickbite-Divisoria’s renovation was
finally completed, and its possession was delivered to the
respondent. However, out of the P432,876.02 renovation
cost, only the amount of P320,000.00 was paid to CLN,
leaving a balance of P112,876.02
 On October 19, 1990, CLN filed a complaint for sum of
money and damages before the RTC against the
respondent and Manlapaz. The respondent was declared
in default for her failure to file a responsive pleading. The
RTC found the respondent liable to pay CLN actual
damages in the amount of P112,876.02 with 12% interest
per annum from June 18, 1990 (the date of first demand)
and 20% attorney’s fees.
 Respondent instituted a complaint for damages against
the petitioners, WPM and Manlapaz. Respondent alleged
that in the previous RTC case, she was adjudged liable for
a contract that she entered into for and in behalf of the
petitioners, to which she should be entitled to
reimbursement. Her participation in the management
agreement was limited only to introducing Manlapaz to
Engineer Carmelo Neri, CLN’s general manager. It was
actually Manlapaz and Neri who agreed on the terms and
conditions of the agreement and that when the complaint
for damages was filed against her. She was abroad and
that she did not know of the case until she returned to the
Philippines and received a copy of the decision of the RTC.
 In his defense, Manlapaz claims that the respondent had
exceeded her authority as agent of WPM, the renovation
agreement should only bind her and since WPM has a
separate and distinct personality, Manlapaz cannot be
made personally liable for the respondent’s claim.
 RTC held that the respondent is entitled to indemnity from
Manlapaz. Based on the records, there is a clear indication
that WPM is a mere instrumentality or business conduit of
Manlapaz. The RTC also found that Manlapaz had
complete control over WPM considering that he is its
chairman, president and treasurer at the same time.
 CA affirmed and held that the petitioners are barred from
raising as a defense the respondent’s alleged lack of
authority to enter into the renovation agreement in view
of their tacit ratification of the contract.
Issue:
1. Whether or not WPM is a mere instrumentality, alter-ego,
and business conduit of Manlapaz? No.
2. Whether or not Manlapaz is jointly and severally liable with
WPM to the respondent for reimbursement, damages and
interest? No.
Held:
Piercing the corporate veil based on the alter ego theory
requires the concurrence of three elements, namely:
a) Control, not mere majority or complete stock control, but
complete domination, not only of finances but of policy and
business practice in respect to the transaction attacked so that
the corporate entity as to this transaction had at the time no
separate mind, will or existence of its own;
b) 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 right; and
c) The aforesaid control and breach of duty must have
proximately caused the injury or unjust loss complained of.
The absence of any of these elements prevents piercing the
corporate veil.
In the present case, the attendant circumstances do not
establish that WPM is a mere alter ego of Manlapaz.
Aside from the fact that Manlapaz was the principal
stockholder of WPM, records do not show that WPM was
organized and controlled, and its affairs conducted in a
manner that made it merely an instrumentality, agency,
conduit or adjunct of Manlapaz.
The respondent failed to prove that Manlapaz, acting as
president, had absolute control over WPM. Even granting that
he exercised a certain degree of control over the finances,
policies and practices of WPM, in view of his position as
president, chairman and treasurer of the corporation, such
control does not necessarily warrant piercing the veil of
corporate fiction since there was not a single proof that WPM
was formed to defraud CLN or the respondent, or that
Manlapaz was guilty of bad faith or fraud.
On the contrary, the evidence establishes that CLN and the
respondent knew and acted on the knowledge that they were
dealing with WPM for the renovation of the latter’s restaurant,
and not with Manlapaz. That WPM later reneged on its
monetary obligation to CLN, resulting to the filing of a civil
case for sum of money against the respondent, does not
automatically indicate fraud, in the absence of any proof to
support it.
It is emphasized that the piercing of the veil of corporate
fiction is frowned upon and thus, must be done with caution.
It can only be done if it has been clearly established that the
separate and distinct personality of the corporation is used to
justify a wrong, protect fraud, or perpetrate a deception. The
court must be certain that the corporate fiction was misused
to such an extent that injustice, fraud, or crime was committed
against another, in disregard of its rights; it cannot be
presumed.
LANUZA v. BF CORP
Facts: Gerardo Lanuza, Jr and Antonio Olbes are members of the
Board of Directors of Shangri-La.
This is an Appeal on Certiorari, assailing the CA's decision and
resolution that affirmed the trial court's decision holding that
petitioners, as directors, should submit themselves as parties to
the arbitration proceedings between BF Corporation and Shangri-
La Properties, Inc. (Shangri-La).
BF Corporation alleged that it entered into agreements with
Shangri-La wherein it undertook to construct for Shangri-La a
mall and a multilevel parking structure along EDSA. Shangri-La
had been consistent in paying BF Corp in accordance with its
progress billing statements. However, Shangri-La started
defaulting in payment. BF Corp filed a complaint against Shangri-
La and its board of directors. BF Corp alleged that Shangri-La
misrepresented it had funds to pay and that it was simply a matter
of delayed processing of BF’s progress billing statements.
Construction eventually was completed but despite demands,
Shangri-La refused to pay the balance. BF also alleged that
Shangri-La’s directors were in bad faith so they should be held
jointly and severally liable with Shangri-La. Shangri-La and
respondent board members filed a motion to suspend the
proceedings in view of BF’s failure to submit its dispute to
arbitration. RTC denied the motion, however. Petitioners filed an
answer saying they are resigned members of the board since July
15, 1991. Shangri-La and respondents then filed certiorari with
CA which granted their petition and ordered submission to
arbitration.
Issue: Should petitioners be made parties to the arbitration
proceedings, pursuant to the arbitration clause provided in the
contract between BF Corporation and Shangri-La?
Held:
Yes. Petitioners point out, their personalities as directors of
Shangri-La are separate and distinct from Shangri-La. Because a
corporation's existence is only by fiction of law, it can only
exercise its rights and powers through its directors, officers, or
agents, who are all natural persons. A corporation cannot sue or
enter into contracts without them. A consequence of a
corporation's separate personality is that consent by a
corporation through its representatives is not consent of the
representative, personally. Its obligations, incurred through
official acts of its representatives, are its own. A stockholder,
director, or representative does not become a party to a
contract. However, when there are allegations of bad faith or
malice against corporate directors or representatives, it becomes
the duty of courts or tribunals to determine if these persons and
the corporation should be treated as one. Section 31 of the
Corporation Code provides the instances when directors, trustees,
or officers may become solidarily liable for corporate acts:
a) The director or trustee willfully and knowingly voted for or
assented to a patently unlawful corporate act;
b) The director or trustee was guilty of gross negligence or
bad faith in directing corporate affairs; and
c) The director or trustee acquired personal or pecuniary
interest in conflict with his or her duties as director or
trustee.
When the courts disregard the corporation’s distinct and separate
personality from its directors or officers, the courts do not say that
the corporation, in all instances and for all purposes, is the same
as its directors, stockholders, officers, and agents. It does not
result in an absolute confusion of personalities of the corporation
and the persons composing or representing it. Courts merely
discount the distinction and treat them as one, in relation to a
specific act, in order to extend the terms of the contract and the
liabilities for all damages to erring corporate officials who
participated in the corporation’s illegal acts. This is done so that
the legal fiction cannot be used to perpetrate illegalities and
injustices.
Thus, in cases alleging solidary liability with the corporation or
praying for the piercing of the corporate veil, parties who are
normally treated as distinct individuals should be made to
participate in the arbitration proceedings in order to determine if
such distinction should indeed be disregarded and, if so, to
determine the extent of their liabilities
Hence, the issue of whether the corporation's acts in violation of
complainant's rights, and the incidental issue of whether piercing
of the corporate veil is warranted, should be determined in a
single proceeding.
ABBOTT LAB v. ALCARAZ
FACTS:
 On June 27, 2004, Abbott Laboratories, Philippines
published in major broadsheet that it is in need of Medical
and Regulatory Affairs Manager stating therein the
responsibilities and qualifications of said position.
 On December 7, 2004, Abbott formally offered Alcaraz the
abovementioned position which was an item under the
company’s Hospira Affiliate Local Surveillance Unit
(ALSU) department.
 On February 12, 2005, Alcaraz signed an employment
contract which stated, inter alia, that she was to be placed
on probation for a period of six (6) months beginning
February 15, 2005 to August 14, 2005.
 She underwent pre-employment orientation where she
was briefed on her duties and responsibilities.
 On March 3, 2005, Alcaraz received an e-mail from the HR
Director explaining the procedure for evaluating the
performance of probationary employees and further
indicated that Abbott had only one evaluation system for
all of its employees. Alcaraz was also given copies of
Abbott’s Code of Conduct and Probationary Performance
Standards and Evaluation and Performance Excellence
Orientation Modules which she had to apply in line with
her task of evaluating the Hospira ALSU staff.
 On April 12, 2005, Alcaraz received an e-mail from Misa
requesting immediate action on the staff’s performance
evaluation as their probationary periods were about to
end. This Alcaraz eventually submitted.
 On May 16, 2005, Alcaraz was called to a meeting with her
immediate supervisor and the former HR Director where
she was informed that she failed to meet the
regularization standards for the position of Regulatory
Affairs Manager. Thereafter she was asked to tender her
resignation, else they be forced to terminate her services.
 She filed a case of illegal dismissal against Abott and its
officers.
 Labor Arbiter dismissed her complaint for lack of merit.
 NLRC reversed and set aside the LA’s ruling and ordered
Abott to reinstate and pay Alcaraz moral and exemplary
damages.
 CA affirmed NLRC decision.
ISSUE(S):
(1) Whether or not Alcaraz was sufficiently informed of the
reasonable standards to qualify her as a regular employee;
and
(2) Whether or not Alcaraz was validly terminated from her
employment.
HELD:
(1) Yes, Alcaraz was sufficiently informed of the reasonable
standards. The employer is made to comply with two (2)
requirements when dealing with a probationary
employee: first, the employer must communicate the
regularization standards to the probationary employee;
and second, the employer must make such communication
at the time of the probationary employee’s engagement. If
the employer fails to comply with either, the employee is
deemed as a regular and not a probationary employee.
A punctilious (detailed) examination of the records
reveals that Abbott had indeed complied with the above-
stated requirements. This conclusion is largely impelled
by the fact that Abbott clearly conveyed to Alcaraz her
duties and responsibilities as Regulatory Affairs Manager
 prior to, during the time of her engagement, and the
incipient stages of her employment.
(2) A probationary employee, like a regular employee, enjoys
security of tenure. However, in cases of probationary
employment, aside from just or authorized causes of
termination, an additional ground is provided under
Article 295 of the Labor Code, i.e., the probationary
employee may also be terminated for failure to qualify as
a regular employee in accordance with the reasonable
standards made known by the employer to the employee
at the time of the engagement.
A different procedure is applied when terminating a
probationary employee; the usual two-notice rule does
not govern. Section 2, Rule I, Book VI of the Implementing
Rules of the Labor Code states that "if the termination is
brought about by the failure of an employee to meet the
standards of the employer in case of probationary
employment, it shall be sufficient that a written notice is
served the employee, within a reasonable time from the
effective date of termination."
As the records show, Alcaraz's dismissal was effected
through a letter dated May 19, 2005 which she received
on May 23, 2005 and again on May 27, 2005. Stated
therein were the reasons for her termination, i.e., that
after proper evaluation, Abbott determined that she failed
to meet the reasonable standards for her regularization
considering her lack of time and people management and
decision-making skills, which are necessary in the
performance of her functions as Regulatory Affairs
Manager. Undeniably, this written notice sufficiently
meets the criteria set forth above, thereby legitimizing the
cause and manner of Alcaraz’s dismissal as a probationary
employee under the parameters set by the Labor Code.
POLYMER RUBBER v. SALAMUDING
FACTS: Bayolo Salamuding, Mariano Gulanan and Rodolfo
Raif were employees of Polymer Rubber Corporation
dismissed after allegedly committing certain irregularities
against Polymer. Salamuding et al filed a complaint for
ULP and ID, nonpayment of overtime and 13th month
against Polymer and its director Joseph Ang, highest
ranking officer. LA: NO ULP but there was ID. Ordered the
reinstatement and back wages, 13th month, OT pay, moral
and exemplary damages and atty’s fees. A writ of
execution was subsequently issued to implement said
judgment. Polymer appealed to the NLRC which affirmed
the decision with modifications. The NLRC deleted the
award of moral and exemplary damages, SIL pay, and
modified the computation of 13th month pay. A writ of
execution was subsequently issued based on the NLRC
decision. The case was elevated to the SC. On September
29, 1993, the SC affirmed the disposition of the NLRC but
modified by deleting the overtime pay. On September 30,
Polymer ceased its operations. In 1994, the LA issued a
writ of execution based on the SC resolution. It was
returned unsatisfied. Another alias writ of execution was
issued in 1997. In the latter part of 2004, Polymer with all
its improvements in the premises was gutted by fire. On
December 2004, Salamuding et al filed a Motion for
Recomputation and Issuance of 5th Alias Writ of
Execution. The Research and Computation Unit of NLRC
came up with the total amount of P2.9M Due to the failure
of Polymer to comment or oppose despite notice, the LA
approved said amount. On April 2005, the LA issued the
5th Alias Writ of Execution, commanding the sheriff to
collect the amount. In its implementation, the shares of
stock of Joseph Ang at USA Resources Corporation was
levied. Polymer and Ang moved to quash the writ and to
lift the notice of garnishment. They alleged that: a) Ang
should not be held solidarily liable with Polymer since it
was only the latter which was held liable in the decision of
the LA, NLRC and the SC. b) The computation of monetary
award in favor of the complainants amounting to P2.9M
was erroneous c) The decision sought to be enforced by
mere motion is already barred by the statute of
limitations. LA granted the motion, and ordered the
quashal and recall of the writ of execution, as well as lifting
the notice of levy on Ang’s shares of stock. It ruled that the
previous decision did not contain any pronouncement
that Ang was also liable. To hold him liable at this stage
when the decision had long become final and executory
will vary the tenor of the judgment, or in excess of its
terms. As to the extent of the computation of the
backwages, the same must only cover the period during
which the company was in actual operation. Moreover, the
motion to execute was already barred by the statute of
limitations. NLRC affirmed the findings but modified the
decision stating that the Salamuding et al are not barred
by the statute of limitations. Salamuding et al filed a
Petition for Certiorari before the CA. CA found merit with
the petition, stating that there has to be a responsible
person working in the interest of Polymer who may also
be considered as the employer. Since Ang as the director
of Polymer was considered the highest ranking officer, he
was therefore properly impleaded and may be held
solidarily liable for the obligations of Polymer to its
dismissed employees. CA imputed bad faith when Polymer
ceased its operations the day after the promulgation of the
SC resolution, allegedly to evade liability. CA found it
necessary to pierce the corporate fiction and make Ang
liable. CA ordered the reinstatement of the writ of
execution and the notice of levy on the shares of stocks
owned by Ang. Polymer and Ang filed a petition claiming
that:
1. Upon finality of decision, the same can no longer be
altered or modified;
2. Officer cannot be personally held liable and be made to
pay the liability of the corporation
3. Polymer cannot be made to pay salaries beyond the
existence of the company
4. Separation pay is only half month salary for every year
of service.
ISSUE: W/N Ang may be made liable
HELD: NO.GR: Obligations incurred as a result of the
directors’ or officers’ acts as corpo agents are not their
personal liability but that of the corpo. They are only held
solidarily liable with the corpo for the illegal termination
of services of EEs if they acted with malice or bad faith. 2
Requisites: (1) it must be alleged in the complaint that the
officer was guilty of gross negligence or bad faith; and (2)
there must be proof that the officer acted in BF. In the
present case, aside from the assertion that the closure was
meant to evade liability, there was no evidence showing
that Ang was responsible for the acts complained of.
Moreover, it was highly improbable that the corporation
would cease its operations if only to evade the payment of
the monetary awards in favor of 3 EEs. Ang is merely one
of the incorporators and to single him out and require him
to personally answer for the liabilities is without basis. In
the absence of a finding that he acted with malice or BF, it
was error for the CA to hold him responsible. Moreover,
the judgment of LA, affirmed by the NLRC and later the SC
which had no pronouncement as to the liability of Ang,
became final and executory and can no longer be altered
even if it was meant to correct what is perceived to be an
 erroneous conclusion of fact or law. Computation of
separation pay is only until the time Polymer ceased
operations.
ALPS v. RODRIGUEZ
FACTS: Respondent Elpidio Rodriguez (Rodriguez) was
previously employed as a bus conductor.He entered into
an employment contract with Contact Tours
Manpower(Contact Tours) and was assigned to work with
petitioner bus company, ALPS Transportation.
During the course of his employment, Rodriguez was
found to have committed irregularities. The latest
irregularity report dated 26 January 2005 stated that he
had collected bus fares without issuing corresponding
tickets to passengers. The report was annotated with the
word Terminate.
Rodriguez alleged that he was dismissed from his
employment on 27 January 2005, or the day after the
issuance of the last irregularity report. However, he did
not receive any written notice of termination.He went
back to the bus company a number of times, but it refused
to readmit him.
Rodriguez filed before the labor arbiter a complaint for
illegal dismissal, nonpayment of 13th month pay, and
damages against ALPS Transportation and Alfredo Perez,
the proprietor of petitioner bus company.
In response to the complaint, petitioners stated that they did not
have any prerogative to dismiss Rodriguez, as he was not their
employee, but that of Contact Tours.
On 12 January 2006, the labor arbiter dismissed the illegal
dismissal complaint for lack of merit.He explained that no
evidence had been adduced to support the contention of
Rodriguez.
NLRC set aside the decision of the labor arbiter and entered a new
one directing respondents to reinstate the complainant without
loss of seniority rights and privileges without backwages. In so
concluding, the NLRC ruled that Contact Tours was a labor-only
contractor.
As regards the claim of illegal dismissal, the NLRC found that
Rodriguez failed to prove that his services were illegally
terminated by petitioners. However, the bus company likewise
failed to prove that he had abandoned his work. Thus, citing
previous rulings of this Court, the NLRC held that in case the
parties fail to prove either abandonment or termination, the
employer should order the employee to report back for work,
accept the latter, and reinstate the employee to the latters former
position. However, an award for backwages is not warranted, as
the parties must bear the burden of their own loss.
Dissatisfied, Rodriguez filed a Rule 65 Petition for Certiorari with
the CA.
The appellate court ruled that, in termination cases, it is the
employer who bears the burden of proving that the employee was
not illegally dismissed.Here, the CA found that ALPS
Transportation failed to present convincing evidence that
Rodriguez had indeed collected bus fares without issuing
corresponding tickets to passengers.
Moreover, the CA gave no credence to ALPS Transportations
argument that Rodriguez had not yet been terminated when he
filed the illegal dismissal complaint, as he had not yet received any
notice of termination.The appellate court explained that, before
the illegal dismissal complaint was filed, more than six months
had lapsed since respondent was last given a bus assignment by
ALPS Transportation.
The CA then ordered ALPS Transportation to reinstate Rodriguez
and to pay him full backwages.
Aggrieved by the appellate courts decision, petitioners filed the
instant Rule 45 Petition before this Court.
ISSUE: Whether or not respondent Rodriguez was validly
dismissed
HELD: For a dismissal to be valid, the rule is that the employer
must comply with both substantive and procedural due process
requirements. Substantive due process requires that the
dismissal must be pursuant to either a just or an authorized cause
under the Labor Code. Procedural due process, on the other hand,
mandates that the employer must observe the twin requirements
of notice and hearing before a dismissal can be effected.
Evidence must, therefore, be substantial and not based on mere
surmises or conjectures for to allow an employer to terminate the
employment of a worker based on mere allegations places the
latter in an uncertain situation and at the sole mercy of the
employer. An accusation that is not substantiated will not ripen
into a holding that there is just cause for dismissal. A mere
accusation of wrongdoing or a mere pronouncement of lack of
confidence is not sufficient cause for a valid dismissal of an
employee. Thus, the failure of the petitioners to convincingly
show that the respondent misappropriated the bus fares renders
the dismissal to be without a valid cause. If doubt exists between
the evidence presented by the employer and the employee, the
scales of justice must be tilted in favor of the latter.
Turning to the issue of procedural due process, both parties agree
that Rodriguez was not given a written notice specifying the
grounds for his termination and giving him a reasonable
opportunity to explain his side.
As to the contention of ALPS that Rodriguez is an employee of
Contact Tours, the presumption is that a contractor is a labor-only
contractor unless he overcomes the burden of proving that it has
substantial capital, investment, tools, and the like. While ALPS
Transportation is not the contractor itself, since it is invoking
Contact Tours status as a legitimate job contractor in order to
avoid liability, it bears the burden of proving that Contact Tours is
an independent contractor.
However, aside from making bare assertions and offering the
Kasunduan between Rodriguez and Contact Tours in
evidence, ALPS Transportation has failed to present any proof to
substantiate the former's status as a legitimate job contractor.
Hence, the legal presumption that Contact Tours is a labor-only
contractor has not been overcome.
As a labor-only contractor, therefore, Contact Tours is deemed to
be an agent of ALPS Transportation. Thus, the latter is responsible
to Contact Tours' employees in the same manner and to the same
extent as if they were directly employed by the bus company.
Finally, since ALPS Transportation is a sole proprietorship owned
by Perez, it is he who must be held liable for the payment of
backwages to Rodriguez. A sole proprietorship does not possess a refilling and sale of LPG cylinders bearing the registered marks
juridical personality separate and distinct from that of the owner of the petitioners without authority from the latter.
of the enterprise. Thus, the owner has unlimited personal liability
for all the debts and obligations of the business, and it is against Issue: Whether probable cause exists to hold petitioners liable
him that a decision for illegal dismissal is to be enforced. for the crimes of trademark infringement and unfair competition
as defined and penalized under Sections 155 and 168, in relation
to Section 170 of Republic Act (R.A.) No. 8293.
REPUBLIC GAS v. PETRON
Ruling: Section 155. Remedies; Infringement. “ Any person who
Petitioner: Regasco entity duly licensed to engage in, conduct shall, without the consent of the owner of the registered mark:
and carry on, the business of refilling, buying, selling, distributing
155.1 Use in commerce any reproduction, counterfeit, copy or
and marketing at wholesale and retail of Liquefied Petroleum
colorable imitation of a registered mark of the same container or
Gas ("LPG"). Petitioners filed the instant Petition for Review on
a dominant feature thereof in connection with the sale, offering
Certiorari after CA denied their MOR when CA reversed the
for sale, distribution, advertising of any goods or services
Resolution of Sec. of DOJ affirming the dismissal of the complaint
including other preparatory steps necessary to carry out the sale
against the petitioners.
of any goods or services on or in connection with which such use
Respondents: ("Petron" for brevity) and Pilipinas Shell is likely to cause confusion, or to cause mistake, or to deceive.
Petroleum Corporation ("Shell" for brevity) are two of the largest
Here, petitioners have actually committed trademark
bulk suppliers and producers of LPG in the Philippines. Petron is
infringement when they refilled, without the respondents'
the registered owner in the Philippines of the trademarks GASUL
consent, the LPG containers bearing the registered marks of the
and GASUL cylinders used for its LPG products. It is the sole
respondents. As noted by respondents, petitioners' acts will
entity in the Philippines authorized to allow refillers and
inevitably confuse the consuming public, since they have no way
distributors to refill, use, sell, and distribute GASUL LPG
of knowing that the gas contained in the LPG tanks bearing
containers, products and its trademarks. Pilipinas Shell, on the
respondents' marks is in reality not the latter's LPG product after
other hand, is the authorized user in the Philippines of the
the same had been illegally refilled. The public will then be led to
tradename, trademarks, symbols or designs of its principal, Shell
believe that petitioners are authorized refillers and distributors
International Petroleum Company Limited, including the marks
of respondents' LPG products, considering that they are
SHELLANE and SHELL device in connection with the production,
accepting empty containers of respondents and refilling them for
sale and distribution of SHELLANE LPGs. It is the only
resale. In the present case, respondents pertinently observed
corporation in the Philippines authorized to allow refillers and
that by refilling and selling LPG cylinders bearing their
distributors to refill, use, sell and distribute SHELLANE LPG
registered marks, petitioners are selling goods by giving them
containers and products. The surveillance revealed that
the general appearance of goods of another manufacturer. the CA
REGASCO LPG Refilling Plant in Malabon was engaged in the
correctly pointed out that there is a showing that the consumers
may be misled into believing that the LPGs contained in the
cylinders bearing the marks "GASUL" and "SHELLANE" are those
goods or products of the petitioners when, in fact, they are not.
Obviously, the mere use of those LPG cylinders bearing the
trademarks "GASUL" and "SHELLANE" will give the LPGs sold by
REGASCO the general appearance of the products of the
petitioners.