ARATE JURIDICAL PERSONALITY AND THE DOCTRINE OF damages that BF Corporation incurred as a result of Sha

G THE VEIL OF CORPORATE FICTION default.

Lanuza, Jr. v. BF Corp.
G.R. No. 174938 | October 1, 2014 | LEONEN, J.
Digest by: LAUIGAN
rs: GERARDO LANUZA, JR. AND ANTONIO O. OLBES
ents: BF CORPORATION, SHANGRI-LA PROPERTIES, INC.,
O C. RAMOS, RUFO B. COLAYCO, MAXIMO G. LICAUCO III, AND
IN C. RAMOS
● On August 3, 1993, Shangri-La, Alfredo C. Ramos, Rufo B.
Maximo G. Licauco III, and Benjamin C. Ramos filed a m
suspend the proceedings in view of BF Corporation’s failure to
dispute to arbitration, in accordance with the arbitration clause
in its contract.
● Petitioners filed their comment on Shangri-La’s and BF Cor
motions, praying that they be excluded from the arbitration pro
for being non-parties to Shangri-La’s and BF Corporation’s agre

quence of a corporation’s separate personality is that consent by a

on through its representatives is not consent of the representative, Issue/s:
● Whether or not petitioners as directors of Shangri-La is person
y. Its obligations, incurred through official acts of its representatives, are
A stockholder, director, or representative does not become a party to a for the contractual obligations entered into by the corporation. -
ust because a corporation executed a contract through that stockholder,
r representative. Hence a corporation’s representatives are generally not Ratio:
bound by the terms of the contract executed in behalf of the corporation.
● Because a corporation’s existence is only by fiction of law, it
exercise its rights and powers through its directors, officers, o
who are all natural persons. A corporation cannot sue or e
contracts without them.
n 1993, BF Corporation filed a collection complaint with the Regional ● A consequence of a corporation’s separate personality is that c
Trial Court against Shangri-La and the members of its board of directors: a corporation through its representatives is not consen
Alfredo C. Ramos, Rufo B.Colayco, Antonio O. Olbes, Gerardo Lanuza, representative, personally. Its obligations, incurred through offic
Jr., Maximo G. Licauco III, and Benjamin C. Ramos. its representatives, are its own. A stockholder, director, or repre
BF Corporation alleged in its complaint that on December 11, 1989 and does not become a party to a contract just because a co
May 30, 1991, it entered into agreements with Shangri-La wherein it executed a contract through that stockholder, director or represe
undertook to construct for Shangri-La a mall and a multilevel parking ● Hence, a corporation’s representatives are generally not boun
structure along EDSA. terms of the contract executed by the corporation. They
Shangri-La had been consistent in paying BF Corporation in accordance personally liable for obligations and liabilities incurred on or in
with its progress billing statements. However, by October 1991, Shangri- the corporation.
La started defaulting in payment. ● A submission to arbitration is a contract. As such, the Ag
BF Corporation alleged that Shangri-La induced BF Corporation to containing the stipulation on arbitration, binds the parties theret
continue with the construction of the buildings using its own funds and as their assigns and heirs.
credit despite Shangri-La’s default. ● When there are allegations of bad faith or malice against
According to BF Corporation, Shangri-La misrepresented that it had directors or representatives, it becomes the duty of courts or tr
unds to pay for its obligations with BF Corporation, and the delay in determine if these persons and the corporation should be treate
payment was simply a matter of delayed processing of BF Corporation’s Without a trial, courts and tribunals have no basis for de
progress billing statements. whether the veil of corporate fiction should be pierced. Courts or
BF Corporation eventually completed the construction of the buildings. do not have such prior knowledge. Thus, the courts or tribunals
Shangri-La allegedly took possession of the buildings while still owing BF determine whether circumstances exist to warrant the courts or
Corporation an outstanding balance. to disregard the distinction between the corporation and the
BF Corporation alleged that despite repeated demands, Shangri-La representing it.
efused to pay the balance owed to it. ● The determination of these circumstances must be made by on
t also alleged that the Shangri-La’s directors were in bad faith in or court in a proceeding participated in by all parties involved,
directing Shangri-La’s affairs. Therefore, they should be held jointly and current representatives of the corporation, and those person
severally liable with Shangri-La for its obligations as well as for the personalities are impliedly the same as the corporation. This is
CORP 2-D D
when the court or tribunal finds that circumstances exist warranting the Dispositive:
piercing of the corporate veil, the corporate representatives are treated WHEREFORE, the petition is DENIED. The Court of Appeals' decision o
as the corporation itself and should be held liable for corporate acts. 2006 and resolution of October 5, 2006 are AFFIRMED.
The corporation’s distinct personality is disregarded, and the corporation
s seen as a mere aggregation of persons undertaking a business under
he collective name of the corporation.
A corporation is an artificial entity created by fiction of law. This means
hat while it is not a person, naturally, the law gives it a distinct
personality and treats it as such. A corporation, in the legal sense, is an
ndividual with a personality that is distinct and separate from other
persons including its stockholders, officers, directors, representatives,
and other juridical entities. The law vests in corporations rights,powers,
and attributes as if they were natural persons with physical existence and
capabilities to act on their own. For instance, they have the power to sue
and enter into transactions or contracts. Section 36 of the Corporation
Code enumerates some of a corporation’s powers, thus:-
○ Section 36. Corporate powers and capacity.– Every
corporation incorporated under this Code has the power and
capacity: 1. To sue and be sued in its corporate name; 2. Of
succession by its corporate name for the period of time stated in
the articles of incorporation and the certificate ofincorporation;
3. To adopt and use a corporate seal; 4. To amend its articles of
incorporation in accordance with the provisions of this Code; 5.
To adopt by-laws, not contrary to law, morals, or public policy,
and to amend or repeal the same in accordance with this Code;
6. In case of stock corporations, to issue or sell stocks to
subscribers and to sell treasury stocks in accordance with the
provisions of this Code; and to admit members to the
corporation if it be a non-stock corporation; 7. To purchase,
receive, take or grant, hold, convey, sell, lease, pledge,
mortgage and otherwise deal with such real and personal
property, including securities and bonds of other corporations,
as the transaction of the lawful business of the corporation may
reasonably and necessarily require, subject to the limitations
prescribed by law and the Constitution; 8. To enter into merger
or consolidation with other corporations as provided in this
Code; 9. To make reasonable donations, including those for the
public welfare or for hospital, charitable, cultural, scientific, civic,
or similar purposes: Provided, That no corporation, domestic or
foreign, shall give donations in aid of any political party or
candidate or for purposes of partisan political activity; 10. To
establish pension, retirement, and other plans for the benefit of
its directors, trustees, officers and employees; and 11. To
exercise such other powers as may be essential or necessary to
carry out its purpose or purposes as stated in its articles of
incorporation.

CORP 2-D D
 Pacific Rehouse Corp. v. Court of Appeals
G.R. No.199687 | March 24, 2014
G.R. No. 201537| March 24, 2014
Ponente: REYES, J
Digest by: LIM
199687
rs: PACIFIC REHOUSE CORPORATION
ents: CA, and EXPORT AND INDUSTRY BANK, INC
201537
rs: ACIFIC REHOUSE CORPORATION, PACIFIC CONCORDE
ATION, MIZPAH HOLDINGS, INC., FORUM HOLDINGS
ATION and EAST ASIA OIL COMPANY, INC.
ents: EXPORT AND INDUSTRY BANK, INC
ership by a single stockholder or by another corporation of all or nearly all
apital stocks of the corporation is not, by itself, sufficient ground for
ng the separate corporate personality. Other circumstances showing that
ration is being used to commit fraud or proof of existence of absolute
er the corporation have to be proven. In short, before the corporate fiction
sregarded, alter-ego elements must be sufficiently established.
Pacific Rehouse Corporation, Pacific Concorde Corporation, Mizpah
Holdings, Inc., Forum Holdings Corporation, and East Asia Oil Company,
nc. filed a case in the RTC of Makati against EIB securities Inc. (E-
securities) for the unauthorized sale of their 32,180,000 DMCI shares.
The RTC held that E-securities should return the DMCI shares to the
espondents while respondents on the other hand should reimburse E-
securities the amount of Php 10, 942,000 as representing the buy back
shares. This decision attained finality and affirmed by the SC.
The writ of execution for the shares was unsatisfied. Thus, respondents
moved for the issuance of an alias writ of execution to hold Export and
ndustry bank Inc. (Export bank) liable for the obligation as E-securities is
a subsidiary of Export and Industry banks Inc.
Respondents claim that E-securities is an alter ego and a business
conduit of Export and Industry bank Inc. This was supported by a
statement from Atty. Ramon Aviado, the corporate secretary of E-
securities and of Export and Industry bank Inc.
The alias writ of execution was granted. Export bank filed an omnibus
motion questioning the writ because it was not impleaded in the case.
This was denied by the RTC and the garnishment of P1,465,799,000.00,
he total amount of the 32,180,000 DMCI shares at P45.55 per share,
against petitioner and/or E-Securities was ordered.
The RTC explained that being one and the same entity in the law the
service of summons upon E-Securities has bestowed jurisdiction over
both the parent and wholly-owned subsidiary.
- Thus, Export bank filed for preliminary injunction to the CA.
granted and the RTC decision was nullified.
- The CA held that that the alter ego theory cannot be sustained
ownership of a subsidiary by the parent company is no
justification to pierce the veil of corporate fiction. There must
apart from mere ownership, that Export Bank exploited or mis
corporate fiction of E-Securities. The existence of in
incorporators, directors and officers between the 2 corporation
conclusive indication that they are the same. It is also not sh
Export Bank has complete control over the business policie
and/or transactions of E- Securities. It was solely E-Secur
contracted the obligation in furtherance of its legitimate
purpose; thus, any fall out must be confined within its limited liab
- A motion for reconsideration was filed in the SC.
Issue/s:
1. WON the corporate veil should be pierced?
2. WON the CA erred in not applying the alter ego doctrine? No
3. WON the absence of Justice Inting’s signature in the CA reso
preliminary injunction renders it null and void?
Ratio:
1. No. Piercing of corporate veil cannot be done.
- The principle of piercing the veil of corporate fiction is basical
only to determine established liability; it is not available to conf
court a jurisdiction it has not acquired, in the first place, over a
impleaded in a case. Hence, any proceedings taken aga
corporation and its property would infringe on its right to due pro
- Jurisdiction over the person is acquired by a valid service of sum
a voluntary appearance in court. Absent these, any judgment of
which has no jurisdiction over the person of the defendant is
void.
- In this case, Export Bank was neither served with summons,
voluntarily appeared before the court. Thus, the judgment sou
enforced against E-Securities cannot be made against them.
- The Arcilla and Violago case are not applicable to this case a
cases, the court has already acquired jurisdiction over the perso
liable.
2. No. The court was correct in not applying the alter ego doctrine.
- It is a fundamental principle of corporation law that a corpora
entity separate and distinct from its stockholders and fro
corporations to which it may be connected. But, this separate an
personality of a corporation is merely a fiction created by
convenience and to promote justice. Thus, when this fiction i
defeat public convenience, justify wrong, protect fraud or defe
or is used as a device to defeat the labor laws, this may be dis
or the veil of corporate fiction pierced. This is true likewise
CORP 2-D D
corporation is merely an adjunct, a business conduit or an alter ego of
another corporation.
The control necessary to invoke the rule is not majority or even complete Dispositive:
stock control but such domination of finances, policies and practices that WHEREFORE, the petition in G.R. No. 199687 is hereby DISMISSED for
he controlled corporation has no separate mind, will or existence of its been rendered moot and academic. The petition in G.R. No. 201537, m
own. Such control must be shown to have been exercised at the time the is
acts complained of took place. Moreover, the control and breach of duty hereby DENIED for lack of merit. Consequently, the Decision dated April
must proximately cause the injury or unjust loss for which the complaint of the Court of Appeals in CA-G.R. SP No. 120979 is AFFIRMED.
s made.
The 3 pronged test to determine to establish when the alter ego doctrine
should be operative:
1) Control, not mere majority or complete stock control, but complete
domination, not only of finances but of policy and business practice in
espect to the transaction attacked so that the corporate entity as to this
ransaction 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 perpetuate the violation of a statutory or other positive legal
duty, or
dishonest and unjust act in contravention of plaintiff's legal right; and
3) The aforesaid control and breach of duty must [have] proximately
caused
he injury or unjust loss complained of.
Absence of one will prevent the piercing of the corporate veil as the
courts are concerned with reality and not form, with how the corporation
operated and the individual defendant's relationship to that operation.
All the circumstances enumerated by the RTC to show the alleged
control of Export bank over e-securities were not proved in accordance
with the rules of court. Even if control was exercised by Export bank,
control, by itself, does not mean that the controlled corporation is a mere
nstrumentality or a business conduit of the mother company. Even
control over the financial and operational concerns of a subsidiary
company does not by itself call for disregarding its corporate ficction.
There must be a perpetuation of fraud behind the control or at least a
raudulent or illegal purpose behind the control in order to justify piercing
he veil of corporate fiction. Such fraudulent intent is lacking in this case.
f the setting up of a subsidiary is for a legitimate purpose, its separate
personality should be respected and the liabilities of the parent and
subsidiary company should be confined to those arising from their
espective business.
e resolution is still valid.
The respondents also assailed the CA resolution rendered by the Special
division of 5. However, the court considered the resolutions to be valid as
he CA had already adjudicated based on the merits of the case.
The absence of CA Associate Justice De Leon’s signature on the
signature page of the resolution of the special division of 5 was due to
nadvertence and was already explained by the CA. They were already
given the signed copy of the documents. Thus, it is already a non issue.
CORP 2-D D
 U.S. v. Milwaukee Refrigerator Transit Co.
142 F. 247 | December 28, 1905
Digest by: LUMBRE
rs: United States
ents: Pabst Brewing Company, Milwaukee Refrigerator Transit Co. et. al.
ation will be looked upon as a legal entity as a general rule and until
reason to the contrary appears; but, when the notion of legal entity is
efeat public convenience, justify wrong, protect fraud, or defend crime, the
gard the cor poration as an association of persons.
The allegations in the suit stated: …
○ that defendant brewing company, which was a large shipper of
beer prior to the enactment of such statute, habitually received
rebates from carriers;
○ that shortly after such enactment, its officers, who were also its
controlling stockholders, organized a transit company
(defendant) and became its officers and the owners of
practically all of its stock, and on behalf of the brewing
company, contracted with it to make all the shipments for the
brewing company; that the transit company contracted for
shipments with such interstate carriers as would pay it from
one-tenth to one-eighth of the published rate for the
transportation, ostensibly as a commission for obtaining the
business, but in fact, as was well known to the' carrier
defendants, as a rebate for the benefit of the brewing company.
Simply put, the brewing company created a dummy transit corporation to
avail of rebates in freight costs. The circumvention goes like dzz -- The
brewing company will pay the carrier the total shipping cost, and to
disguise a rebate, the carrier will pay the transit corporation a
commission, as a soliciting agent, for bringing the brewing company’s
business to it.]
Pabst Brewing Company is a Wisconsin Corporation operating a large
brewery. It sells and ships beer into all the states and territories and to
purchasers in foreign countries.
It has a capital of $10,000,000 or 10,000 shares. Gustav Pabst and Fred
Pabst are brothers, owning 2,000 shares, and with their mother and
sisters over half of the stock. They vote and control a majority of the
stock, and have always directed and controlled the election of
and their action; they have been and are its president, vice p
and general managers, and have always controlled all
purchases, and shipments.
● Milwaukee Refrigerator Transit Co. was incorporated by procu
the attorneys of the brewing company, and at its instance and
with a capital of $150,000, having five directors, and with
acquire and operate refrigerator cars, and contract for the su
operation of refrigerator transportation by land and water.
1
● Upon the passage of the Elkins Act the brewing company was
able to directly secure rebates. Thinking of a device to evade th
the Pabsts, as such officers, and one Howe, as traffic manager,
to contrive and operate a device for such evasion, caused t
company to be formed. Of its 1,500 shares, 1,340 were issued
Pabsts, 35 shares to Fred Pabst’s wife, and the balance t
directors, to give color to the claim that its stock was not own
brewing company.
● All the defendant carriers well knew that the transit comp
organized in the interest of the brewing company, and for the p
evading the law, paid such rebates with tire like purpose and int
● Many thousand tons of said freight have been hauled by d
carriers since the contract was made. On such shipments the
company pays to the carriers the full tariff rate, and the carrier
transit company for use of its refrigerator cars for mileage thre
of a cent to a cent per mile, and in addition an eighth or tenth of
paid them by the brewing company; and in every instance the p
transported by defendant carriers at an eighth or tenth less
published tariff. Such rebates amount to many thousands of do
exact sum unknown to complainants.
● And so a demurrer was instituted by defendants, arguing that i
2
on the face of the bill that the alleged rebates were not paid ba
shipper (the brewing company), but to the Refrigerator Transit C
and, in substance and effect, nothing more is shown than the pa
a soliciting agent (the transit company) of a commission of an
1 Sec. 10. Common carriers, and the officers of such as are corporations, re-ceivers, ag
of such corporations, are prohibited from giving rebates, preferences, and advantages
making unjust discrimina-tions, and are punishable by fine and imprisonment. Under
sec-tion only the agents of corporate carriers, and not the carriers them-selves, were
punishable.-- United States v. Milwaukee Refrigerator Transit Co., 142 F. 247, 249 (190
2 petition/complaint/suit
CORP 2-D D
enth of the published tariff rates, thus showing, in real effect, acts neither
unlawful, immoral, nor injurious.
A motion to strike out certain allegations averring prior and disconnected
llegal acts on its part, said to be material in proof, to characterize the
acts of its principal officers and managers in organizing the transit
company was also raised.
● It is argued that the procurement of the shipments through the c
the mere soliciting of them for the carriers, for which they ar
authorized to pay a part of the rate, in order to get the business
theory of innocence is exploded (lol US court) by the fact, as alle
the transit company is a mere separate name for the brewing
being in fact the same collection of persons and interests

oN there the brewing company fully owns and controls the transit
, as to amount to evasion of the Elkins prohibition - Yes Dispositive:

The demurrers are overruled, and the motion to strike out denied.

That the transit company is controlled by the managing agents of the

brewing company is entirely clear. But is it controlled by the
shipper(brewer) corporation(the company’s juridical personality)? The
solution of this question depends on whether the brewing corporation, in
a case like this, is an association of individuals, rather than a legal entity
apart from those who own and control it.

No doubt the general rule that a corporation is a legal entity, an

nstitution, artificial, intangible, existing only by legal contemplation, and
separate and apart from its constituents, is firmly imbedded in the
common law of this country. It has been so laid down in hundreds of
cases.

t is, however, most significant that the Supreme Court of the United
States was the first to break away from the notion that a corporation is
only a legal entity, when its literal application would operate with
njustice.

Stated in another way, it is that a corporation will be looked upon as a

egal entity as a general rule, and until sufficient reason to the contrary
appears; but, when the notion of legal entity is used to defeat public
convenience, justify wrong, protect fraud, or defend crime, the law will
egard the corporation as an association of persons.

Applying the rule here laid down to the circumstances shown to surround
he brewing company and transit company, it cannot be doubted that
here really is, in substance and effect, an identity of interest, or that the
brewing company, considered as an association of individuals,
eally owns and fully controls the transit company.

Moreover, it clearly appears that the shipper practically controls the

ransit company, and this shows a sufficient identity of interest among the
shareholders of both in these repayments to make them rebates, if paid
and received with unlawful intent.
CORP 2-D D
 General Credit Corp. v. Alsons Dev. and Investment Corp.
G.R. No.154975 | Jan. 29, 2007 | J. Garcia
Digest by: MANZANO
rs: GENERAL CREDIT CORPORATION (now PENTA CAPITAL
CORPORATION)
ents: ALSONS DEVELOPMENT and INVESTMENT CORPORATION
EQUITY CORPORATION
A corporation is invested by law with a personality separate and distinct
e persons composing it, and from any legal entity to which it may be
hus, it may not be made to answer for personal acts and liabilities of its
ers or those of legal entities to which it may be connected, or vice versa.
eral Credit Corporation (GCC), a finance and investment company,
blished its franchise companies in different urban centers of the country.
C secured a license from the Central Bank and the Securities and
hange Commission (SEC) to engage also in quasi-banking activities.
C Equity Corporation (EQUITY) was organized by GCC to take over the
rations and management of its various franchise companies.
ons Development and Investment Corporation (ALSON) and the
antara Family each owned shares in the aforesaid GCC franchise
panies,.
ONS and the Alcantara family, for P2,000,000.00,, sold their
reholdings (101,953 in total) to EQUITY.
UITY issued to ALSONS et al., a bearer promissory note, with 18% per
um; 4 years later, the Alcantara family assigned its rights and interests
r the bearer note to ALSONS.
UITY received letters of demand from ALSONS; the former pleaded
ility to pay interest because it no longer had enough assets
ONS filed a complaint for collection before RTC-Makati against EQUITY
GCC
C was impleaded by ALSONS because under the doctrine of piercing the
of corporate fiction, EQUITY was: (1) organized as a tool and mere
duit of GCC; (2) it acted merely as intermediary or bridge for loan
sactions and other dealings of GCC to its franchises and the investing
ic; and (3) EQUITY is solely dependent upon GCC for its funding
its defense, GCC claims that it is a distinct and separate entity from
UITY.
C-Makati found that EQUITY was but an instrumentality or adjunct of
C and held that EQUITY and GCC are solidarily liable.
appeal, the CA affirmed the decision of the RTC.
C is solidarily liable – YES
● Generally, a corporation is vested by law with a personality dis
separate from those of the persons composing it as well as from th
other entity to which it may be related; Thus, a corporation may not
to answer for acts and liabilities of its stockholders or those of leg
to which it may be connected or vice versa.
● An exception would be the doctrine of piercing the veil of corpora
where the court will often look at the corporation as a mere col
individuals or an aggregation of persons undertaking business as
disregarding the separate juridical personality of the corporation un
group OR when two (2) business enterprises are owned, condu
controlled by the same parties
● There are 3 basic areas where piercing the veil is allowed:
1) Defeat of public convenience - if used as vehicle for the evas
existing obligation;
2) Fraud cases - if used to justify a wrong, protect fraud, or defend
3) Alter ego cases - a corporation is merely a farce, a mere alt
business conduit of a person, or where the corporation is so o
and controlled and its affairs are so conducted as to make it m
instrumentality, agency, conduit or adjunct of another corporatio
● There are more or less 20 circumstances and transactions that s
EQUITY was but an adjunct, an instrumentality or business c
petitioner GCC.
● The Court takes note of the following:
1. Commonality of directors, officers and stockholders and even s
office between GCC and EQUITY - more than 90% of the stockh
EQUITY were also stockholders of GCC;
2. Certain financing and management arrangements between
allowing the GCC to handle the funds of the latter - funds inv
EQUITY in the CCC franchise companies actually came from GC
3. The virtual domination if not control wielded by GCC over the
business policies and practices of respondent EQUITY - the
Equity’s shares were surrendered to GCC; EQUITY had
inadequate capital for the pursuit of its line of business to the e
its business affairs were considered as GCCs own business e
EQUITY never acted independently but took their orders from GC
4. The establishment of EQUITY by GCC to circumvent CB rule and
Usury Law
5. As the parent corporation, GCC shall be held responsible for the
contracts of its subsidiary, for, after all, GCC was the entity whic
and benefited immensely from the fraudulent scheme perpe
violation of the law.
Dispositive:WHEREFORE, the instant petition is DENIED and the
Decision and Resolution of the Court of Appeals are accordingly AF
Costs against the petitioner. SO OR
CORP 2-D D
CC also claimed that the PN was either altered or simulated, but the SC
er of facts and gave great weight to the factual determination by the trial
the CA
Concept Builders, Inc. v. NLRC
G.R. No.108734 | May 29, 1996 | J. Hermosisima, Jr.
Digest by: MEDEL
rs: CONCEPT BUILDERS, INC.
ents: THE NATIONAL LABOR RELATIONS COMMISSION, (First
and Norberto Marabe, Rodolfo Raquel, Cristobal Riego, Manuel Gillego,
Giducos, Pedro Aboigar, Norberto Comendador, Rogello Salut, Emilio
r., Mariano Rio, Paulina Basea, Aifredo Albera, Paquito Salut, Domingo
Romeo Galve, Dominador Sabina, Felipe Radiana, Gavino Sualibio,
scares, Ferdinand Torres, Felipe Basilan, and Ruben Robalos
orate mask may be lifted and the corporate veil may be pierced when a
on is just but the alter ego of a person or of another corporation. Where
f fraud exist; where public convenience is defeated; where a wrong is
be justified thereby, the corporate fiction or the notion of legal entity
me to naught. The law in these instances will regard the corporation as a
ociation of persons and, in case of two corporations, merge them into one.
ere a sister corporation is used as a shield to evade a corporation’s
y liability for damages, the corporation may not be heard to say that it has
ality separate and distinct from the other corporation. The piercing of the
veil comes into play.
Concept Builders, Inc. is engaged in the construction business. The
private respondents were employed by said company as laborers,
carpenters and riggers.
The private respondents were served individual written notices of
ermination of employment by Concept Builders.
○ 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.
○ However, the project had not yet, in fact, been finished and
completed. Concept Builders even had to engage the services
of sub-contractors.
Aggrieved, 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 Concept Builders.
LA: ordered Concept Builders to reinstate private respondents and to pay
hem back wages equivalent to 1 year.
○ A writ of execution was served. The writ was partially satisfied
through garnishment of sums from Concept Builder’s debtor, the
Metropolitan Waterworks and Sewerage Authority.
● An Alias Writ of Execution was issued, directing the sheriff to c
balance of the judgment award.
● Upon failure to enforce the alias writ of execution, the sheriff s
following in his progress report:
○ All the employees inside Concept Builders premise
Maysan Road, Valenzuela, Metro Manila, claimed
were employees of Hydro Pipes Philippines, Inc. (HPP
○ Levy was made upon the personal properties he
the premises;
○ Security guards with high-powered guns prevented
removing the properties he had levied upon
● A certain Dennis Cuyegkeng filed a third-party claim alleg
the properties sought to be levied upon by the sheriff wer
by Hydro (Phils.), Inc. (HPPI) of which he is the Vice-Preside
● The NLRC issued a break-open order as to to enable the sheri
the premises and proceed with the public auction sale of the
personal properties.
Issue: Whether the NLRC committed grave abuse of discretion when it
break-open order to the sheriff to be enforced against personal property
the premises of Concept Builder’s sister company. NO.
Ratio:
● It is a fundamental principle of corporation law that a corpora
entity separate and distinct from its stockholders and fro
corporations to which it may be connected. But, this separate an
personality of a corporation is merely a fiction created by
convenience and to promote justice. So, when the notion of
juridical personality is used to defeat public convenience, justi
protect fraud or defend crime, or is used as a device to defeat
laws, this separate personality of the corporation may be disre
the veil of corporate fiction pierced. This is true likewise w
corporation is merely an adjunct, a business conduit or an
of another corporation.
● The conditions under which the juridical entity may be disrega
according to the peculiar facts and circumstances of each case
and fast rule can be accurately laid down, but certainly, there
probative factors of identity that will justify the application of the
of piercing the corporate veil, to wit:
○ Stock ownership by one or common ownership
corporations.
○ Identity of directors and officers.
○ The manner of keeping corporate books and records.
○ Methods of conducting the business.
● The SEC en banc explained the instrumentality rule which t
have applied in disregarding the separate juridical perso
corporations as follows:
CORP 2-D D
 Where one corporation is so organized and Dispositive: WHEREFORE, the petition is DISMISSED and the
controlled and its affairs are conducted so that it resolutions of the NLRC, dated April 23, 1992 and December 3, 1
is, in fact, a mere instrumentality or adjunct of the AFFIRMED.
other, the fiction of the corporate entity of the
instrumentality may be disregarded.
The test in determining the applicability of the doctrine of piercing
he veil of corporate fiction is as follows:
○ 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;
○ 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 plaintiffs legal rights; and
○ The aforesaid control and breach of duty must proximately
cause the injury or unjust loss complained of.
The absence of any one of these elements prevents piercing the
corporate veil. In applying the instrumentality or alter ego doctrine, the
courts are concerned with reality and not form, with how the corporation
operated and the individual defendants relationship to that operation.
Thus, the question of whether a corporation is a mere alter ego, a mere
sheet or paper corporation, a sham or a subterfuge is purely one of fact.
○ In this case, the NLRC noted that, while Concept Builders
claimed that it ceased its business operations on April 29, 1986,
it filed an Information Sheet with the Securities and Exchange
Commission on May 15, 1987, stating that its office address is
at 355 Maysan Road, Valenzuela, Metro Manila.
○ On the other hand, HPPI, the third-party claimant, submitted on
the same day, a similar information sheet stating that its office
address is at 355 Maysan Road, Valenzuela, Metro Manila.
○ Both information sheets were filed by the same Virgilio O.
Casino as the corporate secretary of both corporations. It would
also not be amiss to note that both corporations had the same
president, the same board of directors, the same corporate
officers, and substantially the same subscribers.
Clearly, Concept Builders ceased its business operations in order to
evade the payment to private respondents of backwages and to bar their
einstatement to their former positions. HPPI is obviously a business
conduit of Concept Builders and its emergence was skillfully orchestrated
o avoid the financial liability that already attached to petitioner
corporation.
t is very obvious that the second corporation seeks the protective shield
of a corporate fiction whose veil in the present case could, and should,
be pierced as it was deliberately and maliciously designed to evade its
inancial obligation to its employees.

CORP 2-D D
 Traders Royal Bank v. Court of Appeals
G.R. No. 93397 | March 3, 1997 | TORRES, JR., J.
Digest by: NAVARRO
rs: TRADERS ROYAL BANK
ents: COURT OF APPEALS, FILRITERS GUARANTY ASSURANCE
ATION and CENTRAL BANK of the PHILIPPINES
he veil of corporate entity requires the court to see through the protective
hich exempts its stockholders from liabilities that ordinarily, they could be
, or distinguished one corporation from a seemingly separate one, were it
e existing corporate fiction. But to do this, the court must be sure that the
fiction was misused, to such an extent that injustice, fraud, or crime was
d upon another, disregarding, thus, his, her, or its rights. It is the
of the interests of innocent third persons dealing with the corporate entity
law aims to protect by this doctrine.
hat Filfinance owns majority shares in Filriters is not by itself a ground to
the independent corporate status of Filriters.
Filriters Guaranty Assurance Corporation (Filriters) executed a
Detached Assignment" whereby, as registered owner, Filriters sold,
ransferred, assigned and delivered unto Philippine Underwriters Finance
Corporation (Philfinance) all its rights and title to Central Bank
Certificates of Indebtedness (CBCI), having an aggregate value of
P3,500,000.00
Traders Royal Bank (Traders) entered into a Repurchase Agreement
with PhilFinance whereby, for and in consideration of the sum of
P500,000, PhilFinance sold, transferred and delivered to Traders CBCI
4-year, 8th series, Serial No. D891 with a face value of P500,000
Pursuant to the aforesaid Repurchase Agreement, Philfinance agreed to
epurchase CBCI Serial No. D891 at the stipulated price of P519,361.11
PhilFinance failed to repurchase the CBCI on the agreed date of maturity
Owing to the default of PhilFinance, it executed a Detached Assignment
n favor of Traders
○ By means of said Detachment, Philfinance transferred and
assigned all, its rights and title in the said CBCI to Traders
Traders presented the CBCI together with the two aforementioned
Detached Assignments to the Securities Servicing Department of
Filriters, and requested the latter to effect the transfer of the CBCI on its
books and to issue a new certificate in the name of petitioner as absolute
owner thereof
Filriters failed and refused to register the transfer as requested
The express provisions governing the transfer of the CBCI were
substantially complied with Traders’ request for registration and, without
a doubt, the Detached Assignments presented to respondent were
sufficient authorizations in writing executed by the registere
Filriters, and its transferee, PhilFinance
● Traders prayed for the registration by the Central Bank of th
CBCI in its name
● Traders’ position rests on the argument that Philfinance own
Filriters equity and the two corporations have identical corporat
thus demanding the application of the doctrine of piercing th
corporate fiction, as to give validity to the transfer of the C
registered owner to Traders
● According to Traders, since Philfinance own about 90% of Fil
the two companies have the same corporate officers, if the pr
piercing the veil of corporate entity were to be applied in this c
Traders’ payment to Philfinance for the CBCI purchased by it
as well be considered a payment to Filriters, the registered ow
CBCI as to bar the latter from claiming, as it has, that it never
any payment for that CBCI sold and that said CBCI was sold w
authority
Issue/s:
1. W/N the doctrine of piercing the veil of corporate fiction appli
case – NO
2. W/N the sale from Filriters to Philfinance was fictitious, and there
and inexistent -- YES
Ratio:
1. Piercing the veil of corporate entity requires the court to see thr
protective shroud which exempts its stockholders from liabilities that
they could be subject to, or distinguished one corporation from a s
separate one, were it not for the existing corporate fiction. But to do this,
must be sure that the corporate fiction was misused, to such an ex
injustice, fraud, or crime was committed upon another, disregarding, thus
or its rights. It is the protection of the interests of innocent third person
with the corporate entity which the law aims to protect by this doctrine.
● The corporate separateness between Filriters and Philfinance
despite the petitioners insistence on the contrary
○ Other than the allegation that Filriters is 90% o
Philfinance, and the identity of one shall be maintained
other, there is nothing else which could lead the co
circumstance to disregard their corporate personalities
● The fact that Filfinance owns majority shares in Filriters is not
ground to disregard the independent corporate status of Filriters
● In Liddel & Co., Inc. vs. Collector of Internal Revenue,
ownership by a single stockholder or by another corporation
nearly all of the capital stock of a corporation is not of itself a
reason for disregarding the fiction of separate corporate persona
● In the case at bar, there is sufficient showing that the petitione
defrauded at all when it acquired the subject certificate of inde
from Philfinance
CORP 2-D Di
 face the subject certificates states that it is registered in the name of
This should have put the petitioner on notice, and prompted it to inquire
ers as to Philfinance's title over the same or its authority to assign the
. As it is, there is no showing to the effect that petitioner had any
whatsoever with Filriters, nor did it make inquiries as to the ownership of
cate.
The terms of the CBCI No. D891 contain a provision on its TRANSFER.
○ TRANSFER. This Certificate shall pass by delivery unless it is
registered in the owner's name at any office of the Bank or any
agency duly authorized by the Bank, and such registration is
noted hereon. After such registration no transfer thereof shall be
valid unless made at said office (where the Certificates has
been registered) by the registered owner hereof, in person, or
by his attorney, duly authorized in writing and similarly noted
hereon and upon payment of a nominal transfer fee which may
be required, a new Certificate shall be issued to the transferee
of the registered owner thereof.
This is notice to petitioner to secure from Filriters a written authorization
or the transfer or to require Philfinance to submit such an authorization
rom Filriters.
Moreover, CBCI No. D891 is governed by CB Circular No. 769, series of
1990
○ Sec. 3. Assignment of Registered Certificates. — Assignment of
registered certificates shall not be valid unless made at the
office where the same have been issued and registered or at
the Securities Servicing Department, Central Bank of the
Philippines, and by the registered owner thereof, in person or by
his representative, duly authorized in writing.
The transfer made by Filriters to Philfinance did not conform to the said
Central Bank Circular, which for all intents, is considered part of the law.
Alfredo O. Banaria, who had signed the deed of assignment from Filriters
o Philfinance, purportedly for and in favor of Filriters, did not have the
necessary written authorization from the Board of Directors of Filriters to
act for the latter.
As it is, the sale from Filriters to Philfinance was fictitious, and therefore
void and inexistent, as there was no consideration for the same.

ve:
INGLY, the petition is DISMISSED and the decision appealed from
uary 29, 1990 is hereby AFFIRMED.

CORP 2-D Di
 Indophil Textile Mill Workers Union-PTGWO v. Calica
G.R. No. 96490 | February 3, 1992 | MEDIALDEA, J.
Digest by: PEÑALOSA
rs: INDOPHIL TEXTILE MILL WORKERS UNION-PTGWO
ents: VOLUNTARY ARBITRATOR TEODORICO P. CALICA and
L TEXTILE MILLS, INC.
e doctrine of piercing the veil of corporate entity, when valid grounds
exist, the legal fiction that a corporation is an entity with a juridical
y separate and distinct from its members or stockholders may be
ed. In such cases, the corporation will be considered as a mere
on of persons. The members or stockholders of the corporation will be
d as the corporation, that is liability will attach directly to the officers and
ers.
n April, 1987, petitioner Indophil Textile Mill Workers Union-PTGWO
Union) and private respondent Indophil Textile Mills, Inc. (Textile)
executed a collective bargaining agreement (CBA) effective from April 1,
1987 to March 31, 1990.
○ The Union is a labor organization and is the exclusive
bargaining agent of all rank-and-file employees of of Indophil
Textile Mills, Inc.
○ Textile is engaged in the business of manufacturing yarns of
various counts and kinds and textiles.
Meanwhile, in 1967, Indophil Acrylic Manufacturing Corporation (Acrylic)
was formed and registered with the Securities and Exchange
Commission. The application was approved. Acrylic became operational.
○ Acrylic manufactures, buys, sells at wholesale basis, barters,
imports, exports and otherwise deals in yarns of various counts
and kinds.
n 1989, workers of Acrylic unionized and a duly certified Collective
Bargaining Agreement was executed.
n 1990, the Union claimed that the plant facilities built and set up by
Acrylic should be considered as an extension of the facilities of Textile,
as stipulated in their CBA:
c) This Agreement shall apply to the Company's plant facilities
and installations and to any extension and expansion
thereat.
n other words, it is the petitioner's contention that Acrylic is part of the
ndophil bargaining unit.
Textile opposed this claim and said that it (Textile) is separate and
distinct from Acrylic.
This led the opposing parties to enter into a submission agreement. They
both requested Respondent Teodorico P. Calica (from DOLE) to be the
Voluntary Arbitrator for the proper interpretation of the dispu
provision
● In his decision, the Voluntary Arbitrator ruled in favor of Te
dispositive portion provides:
PREMISES CONSIDERED, it would be a strained inte
and application of the questioned CBA provis
would extend to the employees of Acrylic the
clause of Indophil Textile Mills CBA. Wherefore,
is made to the effect that the proper interpreta
application of Sec. l, (c), Art. I, of the 1987 CBA do
extend to the employees of Acrylic as an exte
expansion of Indophil Textile Mills, Inc.
● Hence, this petition by the Union.
○ It claimed that the Articles of Incorporation of the two c
show that they are engaged in the same kind of bu
manufacture and sale of yarns – and that the two cor
have practically the same incorporators, directors and o
○ The Union further argued that of the total stock subsc
Acrylic, P1,749,970.00 which represents seventy perc
of the total subscription of P2,500,000.00 was subscri
Textile.
○ The Union claimed that the Arbitrator failed to recogniz
creation of Acrylic is but a devise of Textile to e
application of the CBA
○ Other arguments asserted by the Union are as follows:
1. the two corporations have their physical plan
and facilities situated in the same compound,
Lambakin, Marilao, Bulacan;
2. Many of Textile‘s own machineries, such a
machines, reeling, among others, were trans
and are now installed and being used in th
plant;
3. The services of a number of units, depart
sections of private respondent are provided t
and
4. The employees of Textile are the same
manning and servicing the units of Acrylic.
Issue/s:
Is Acrylic a mere extension or expansion of Textile? – NO.
W/N the Piercing Doctrine can be applied? – NO.
Ratio:
● The Court denies the position of the Union to pierce the veil of
entity of Acrylic. The SC ruled that the two companies should b
as distinct and separate from one another.
CORP 2-D Di
The Court said that the arguments presented by the Union are
nsufficient to justify the piercing of the corporate veil of Acrylic
● Under the doctrine of piercing the veil of corporate entity, when
valid grounds therefore exist, the legal fiction that a corporation
is an entity with a juridical personality separate and distinct from
its members or stockholders may be disregarded. In such
cases, the corporation will be considered as a mere association
of persons. The members or stockholders of the corporation will
be considered as the corporation, that is liability will attach
directly to the officers and stockholders.
● The doctrine applies when the corporate fiction is used to defeat
public convenience, justify wrong, protect fraud, or defend
crime, or when it is made as a shield to confuse the legitimate
issues, or where a corporation is the 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.
Furthermore, as held in Umali vs CA, the legal corporate entity is
disregarded only if it seeks to hold the officers and stockholders directly
iable for a corporate debt or obligation.
n this case, the Union does not even seek to impose a claim against the
members of Acrylic.

ve:
INGLY, the petition is DENIED and the award of the respondent
Arbitrator are hereby AFFIRMED.

CORP 2-D Di
 Francisco Motors Corp. v CA
G.R. No. 100812 | June 25, 1999 | QUISUMBING, J.
Digest by: REGADO ||UPSIDE DOWN
rs: Francisco Motors Corporation
ents: Court of appeals and Sps. Gregorio and Librada Manuel
n the case at bar, instead of holding certain individuals or persons
esponsible for an alleged corporate act, the situation has been reversed.
t is the petitioner as a corporation which is being ordered to answer for
he personal liability of certain individual directors, officers and
ncorporators concerned. Hence, it appears to us that the doctrine has
been turned upside down because of its erroneous invocation
Furthermore, 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 therefore by piercing its corporate veil.
On January 23, 1985, petitioner filed a complaint against private
espondents to recover P3,412.06, representing the balance of the jeep
body purchased by the Manuels from petitioner; an additional sum of
P20,454.80 representing the unpaid balance on the cost of repair of the
vehicle; and six thousand pesos P6,000.00 for cost of suit and attorneys
ees
Private respondents interposed a counterclaim for unpaid legal services
by Gregorio Manuel in the amount of P50,000 which was not paid by the
ncorporators, directors and officers of the petitioner.
TC in favor of petitioner in regard to the petitioners claim for money, but
also allowed the counter-claim of private respondents
On the question of its liability for attorneys fees owing to private
espondent Gregorio Manuel, petitioner argued that being a
corporation, it should not be held liable therefor because these fees were
owed by the incorporators, directors and officers of the corporation in
heir personal capacity as heirs of Benita Trinidad. corporation, then its distinct personality may be ignored
Petitioner stressed that the personality of the corporation, vis--vis the
ndividual persons who hired the services of private respondent, is
separate and distinct, hence, the liability of said individuals did not
become an obligation chargeable against petitioner.
Court of Appeals ruled:
However, this distinct and separate personality is merely a fictio
by law for convenience and to promote justice. Accordingly, this
personality of the corporation may be disregarded, or th
corporate fiction pierced, in cases where it is used as a cloak or
found (sic) illegality, or to work an injustice, or where nec
achieve equity or when necessary for the protection of creditors
Bayan, Inc. vs. Araneta, Inc., 72 SCRA 347) Corporations are c
of natural persons and the legal fiction of a separate
personality is not a shield for the commission of injustice and
(Chemplex Philippines, Inc. vs. Pamatian, 57 SCRA 408) In th
case, evidence shows that the plaintiff-appellant Francisc
Corporation is composed of the heirs of the late Benita Tr
directors and incorporators for whom defendant Gregorio
rendered legal services in the intestate estate case of their
mother.
ISSUE:WHETHER OR NOT PLAINTIFF-APPELLANT NOT BEING
PARTY IN THE ALLEGED PERMISSIVE COUNTERCLAIM SHOULD B
LIABLE TO THE CLAIM OF DEFENDANT-APPELLEES.
HELD:
To resolve the issues in this case, we must first determine the propriety o
the veil of corporate fiction.
● Basic in corporation law is the principle that a corporation has a
personality distinct from its stockholders and from other corpo
which it may be connected.
● However, under the doctrine of piercing the veil of corporate e
corporations separate juridical personality may be disrega
example, when the corporate identity is used to
❖ defeat public convenience,
❖ justify wrong,
❖ protect fraud,
❖ or defend crime.
❖ Also, where the corporation is a mere alter ego or
conduit of a person, or where the corporation is so o
and controlled and its affairs are so conducted as to
merely an instrumentality, agency, conduit or adjunct o
● In these circumstances, the courts will treat the corporation a
aggrupation of persons and the liability will directly attach
The legal fiction of a separate corporate personality in th
instances, for reasons of public policy and in the interest of justic
justifiably set aside.
CORP 2-D Di
 n our view, however, given the facts and circumstances of this case, the ● The claim for legal fees against the concerned individual inco
doctrine of piercing the corporate veil has no relevant application here. officers and directors could not be properly directed ag
The rationale behind piercing a corporations identity in a given case is to corporation without violating basic principles governing corp
emove the barrier between the corporation from the persons comprising Moreover, every action including a counterclaim must be pros
t to thwart the fraudulent and illegal schemes of those who use the defended in the name of the real party in interest. It is plainly a
corporate personality as a shield for undertaking certain proscribed lay the claim for legal fees of private respondent Gregorio Man
activities. door of petitioner (FMC) rather than individual members of the
However, in the case at bar, instead of holding certain individuals or family.
persons responsible for an alleged corporate act, the situation has been
eversed. It is the petitioner as a corporation which is being ordered to ● WHEREFORE, the petition is hereby GRANTED and the
answer for the personal liability of certain individual directors, officers and decision is hereby REVERSED insofar only as it held Francisc
ncorporators concerned. Corporation liable for the legal obligation owing to private re
Hence, it appears to us that the doctrine has been turned upside Gregorio Manuel; but this decision is without prejudice to his
down because of its erroneous invocation. Note that according to proper suit against the concerned members of the Francisco
private respondent Gregorio Manuel his services were solicited as their personal capacity. No pronouncement as to costs.
counsel for members of the Francisco family to represent them in the ● SO ORDERED.
ntestate proceedings over Benita Trinidads estate. These estate
proceedings did not involve any business of petitioner.
Note also that he sought to collect legal fees not just from certain
Francisco family members but also from petitioner corporation on the
claims that its management had requested his services and he acceded
hereto as an employee of petitioner from whom it could be deduced he
was also receiving a salary.
His move to recover unpaid legal fees through a counterclaim against
Francisco Motors Corporation, to offset the unpaid balance of the
purchase and repair of a jeep body could only result from an obvious
misapprehension that petitioners corporate assets could be used to
answer for the liabilities of its individual directors, officers, and
ncorporators.
Such result if permitted could easily prejudice the corporation, its own
creditors, and even other stockholders; hence, clearly inequitous to
petitioner.
Furthermore, 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
hat the corporation is perpetuating fraud or promoting injustice, and be
hereby held liable therefor by piercing its corporate veil.
While there are no hard and fast rules on disregarding separate
corporate identity, we must always be mindful of its function and
purpose. A court should be careful in assessing the milieu where the
doctrine of piercing the corporate veil may be applied. Otherwise an
njustice, although unintended, may result from its erroneous application.

CORP 2-D Di
 La Campana Coffee Factory v. Kaisahan ng Manggagawa
G.R. No.L-5677 | May 25, 1953 | J. Reyes
Digest by: RELUCIO
rs: La Campana Coffee Factory, Inc., and Tan Tong, doing business
trade name "La Campana Gaugau Packing"
ents: Kaisahan Ng Mga Manggagawa Sa La Campana (KKM) and The
ndustrial Relations
ine that a corporation is a legal entity existing separate and apart from the
omposing it is a legal theory introduced for purposes of convenience and
ve the ends of justice. The concept cannot, therefore, be extended to a
ond its reason and policy, and when invoked in support of an end
e of this policy, will be disregarded by the courts. Thus, in an appropriate
in furtherance of the ends of justice, a corporation and the individual or
s owning all its stocks and assets will be treated as identical, the
entity being disregarded where used as a cloak or cover for fraud or
Tan Tong, has been engaged in the business of buying and selling
gaugau under the trade name La Campana Gaugau Packing. On July 6,
1950, Tan Tong, with himself and members of his family, organized a
amily corporation known as La Campana Coffee Factory Co., Inc., with
ts principal office located in the same place as that of La Campana
Gaugau Packing.
Before the formation of the corporation, Tan Tong had entered into a
collective bargaining agreement (CBA) with the Philippine Legion of
Organized Workers (PLOW) to which the union of Tan Tong's employees
was then affiliated. Seceding, however, from the PLOW, Tan Tong's
employees later formed their own organization known as Kaisahan Ng
Mga Manggagawa Sa La Campana (Kaisahan).
On July 19, 1951, Kaisahan with 66 members — workers all of them of
both La Campana Gaugau Packing and La Campana Coffee Factory
Co., Inc. demanded for higher wages and more privileges . As the
demand was not granted and an attempt at settlement failed, the Dept.
of Labor certified the dispute to the Court of Industrial Relations.
La Campana filed a motion to dismiss on the following grounds; that the
action is directed against two different entities with distinct personalities,
with "La Campana Starch Factory" and the "La Campana Coffee Factory,
nc.”; that the workers of the "La Campana Coffee Factory, Inc." are less
han thirty-one.
● Ocular inspections were made, and on the basis of the
gathered, the Court of Industrial Relations held that there is
management for the business of gau-gau and coffee with w
laborers are dealing regarding their work. Consequently, it d
motion to dismiss.
● Petitioners contend that the Industrial Court had no jurisdictio
cognizance of the case, because the petitioner La Campan
Factory, Inc. has only 14 employees, only 5 of whom are memb
respondent union and therefore the absence of the jurisdictiona
(30) as provided by sections 1 and 4 of Commonwealth Act No.
Issue/s:
W/N the Court of Industrial Relations was correct in ruling that La
Gaugau Packing and La Campana Coffee Factory Co. Inc., are operat
one single management, that is, as one business though with two trade n
Yes, they are to be considered as one and there being more than 30
involved the court duly acquired jurisdiction over the case.
Ratio:
● True, the coffee factory is a corporation and, by legal fiction,
existing separate and apart from the persons composing it, th
Tong and his family. But it is settled that this fiction of law, w
been introduced as a matter of convenience and to subserve th
justice cannot be invoked to further an end subversive of that pu
● Disregarding Corporate Entity. — The doctrine that a corpora
legal entity existing separate and apart from the persons comp
a legal theory introduced for purposes of convenience and to
the ends of justice. The concept cannot, therefore, be extended
beyond its reason and policy, and when invoked in support o
subversive of this policy, will be disregarded by the courts. Th
appropriate case and in furtherance of the ends of justice, a co
and the individual or individuals owning all its stocks and asse
treated as identical, the corporate entity being disregarded wh
as a cloak or cover for fraud or illegality.
● In the present case Tan Tong appears to be the owner of th
factory. And the coffee factory, though an incorporated busin
reality owned exclusively by Tan Tong and his family.
● As found by the Court of Industrial Relations, the two factories
one office, one management and one payroll, except after Ju
day the case was certified to the Court of Industrial Relations,
person who was discharging the office of cashier for both branch
business began preparing separate payrolls for the two.
CORP 2-D Di
Also, as found by the industrial court, the laborers of the gaugau factory
and the coffee factory were interchangeable, that is, the laborers from
he gaugau factory were sometimes transferred to the coffee factory and
vice-versa.

n view of all these, the attempt to make the two factories appear as two
separate businesses, when in reality they are but one, is but a device to
defeat the ends of the law and should not be permitted to prevail.

ve:
the foregoing, the petition is denied, with costs against the petitioner.

ue regarding the suspension of the union’s permit and its personality to

to be noted that before the certification of the case to the Industrial
July 17, 1951, the petitioner Kaisahan, had a separate permit from the
abor. This permit was suspended only on September 30, 1951. The SC
that jurisdiction was not lost when the Dept of Labor suspended the
the respondent as a Labor organization. For once jurisdiction is acquired
ourt of Industrial Relations it is retained until the case is completely

CORP 2-D Di
 PNB v. Ritratto Group, Inc.
G.R. No. 142616 | July 31, 2001 | KAPUNAN, J.
Digest by: RIOFLORIDO
rs: PHILIPPINE NATIONAL BANK
ents: RITRATTO GROUP INC., RIATTO INTERNATIONAL, INC., and
N GENERAL MERCHANDISE
he corporate veil is an equitable doctrine developed to address situations
e separate corporate personality of a corporation is abused or used for
purposes.
or review on certiorari
Petitioner PNB seeks to annul and set aside
○ CA Decision (March 27, 2000): affirmed the Order issuing a writ
of preliminary injuction (WPI) of the RTC of Makati (June 30,
1999)
○ CA Order (October 4, 1999): which denied petitioner PNB’s
motion to dismiss
Petitioner Philippine National Bank — a domestic corporation organized
and existing under Philippine law
Respondents Ritratto Group, Inc., Riatto International, Inc. and Dadasan
General Merchandise — domestic corporations, likewise, organized and
existing under Philippine law
nts:
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 respondents
○ Amount of US$300,000.00
○ Secured by real estate mortgages constituted over 4 parcels of
land in Makati City
○ This credit facility was later increased successively to:
▪ US$1,140,000.00 in September 1996
▪ US$1,290,000.00 in November 1996
▪ US$1,425,000.00 in February 1997
▪ Decreased to US$1,421,316.18 in April 1998
○ Respondents made repayments of the loan incurred by
remitting those amounts to their loan account with PNB-IFL in
Hong Kong
April 30, 1998 — however, as of this date, their outstanding obligations
stood at US$1,497,274.70
Pursuant to the terms of the real estate mortgages, PNB-IFL, through its
attorney-in-fact petitioner PNB, notified the respondents of the
foreclosure of all the real estate mortgages and that the p
subject thereof were to be sold at a public auction on May 27
the Makati City Hall
● May 25, 1999 — respondents filed a complaint for injunction w
for the issuance of a WPI and/or TRO before the RTC of Makati
○ The Executive Judge of the RTC of Makati issued a
TRO
● May 28, 1999 — the case was raffled to Branch 147 of the
Makati
○ The trial judge then set a hearing on June 8, 1999.
● June 8, 1999 — at the hearing of the application for p
injunction, petitioner PNB was given a period of 7 days to file
opposition to the application
● June 15, 1999 — petitioner PNB filed an opposition to the appl
a WPI to which the respondents filed a reply
● June 25, 1999 — petitioner PNB filed a motion to dismiss; groun
○ Failure to state a cause of action
○ Absence of any privity between the petitioner P
respondents
● June 30, 1999 — the RTC judge issued an Order for the issu
WPI
● July 14, 1999 — WPI was issued
● October 4, 1999 — the motion to dismiss was denied by the
judge for lack of merit
○ Petitioner PNB, thereafter, in a petition for certio
prohibition assailed the issuance of the WPI before the
○ In the impugned decision, the CA dismissed the petitio
this petition
Petitioner’s contentions:
● The CA palpably erred in not dismissing the complaint a quo, co
that by the allegations of the complaint, no cause of action exis
petitioner PNB, which is not a real party in interest being
attorney-in-fact authorized to enforce an ancillary contract.
● The CA palpably erred in allowing the RTC to issue in excess
jurisdiction a WPI over and beyond what was prayed for in the
a quo contrary to chief of staff (AFP vs. Guadiz Jr.)
Respondents’ contentions:
● Even assuming arguendo that petitioner PNB and PNB-IF
separate entities, petitioner PNB is still the party-in-intere
application for preliminary injunction because it is tasked to co
of foreclosing respondents’ properties.
● The entire credit facility is void as it contains stipulations in vi
the principle of mutuality of contracts.
● In addition, respondents justified the act of the court a
applying the doctrine of “Piercing the Veil of Corporate Ide
CORP 2-D Di
stating that petitioner PNB is merely an alter ego or a business
conduit of PNB-IFL.
B is privy to the loan contracts entered into by respondent & PNB-IFL
PNB-IFL is owned by PNB — NO
is an alter ego of PNB-IFL — NO
must issue — NO
he loan contract (need to understand this for context)
Respondents sought to enjoin and restrain PNB from the foreclosure and
eventual sale of the property in order to protect their rights to said
property by reason of void credit facilities as bases for the real estate
mortgage over the said property.
○ The contract questioned is one entered into between
respondent and PNB-IFL, not PNB.
○ Respondents admit that petitioner PNB is a mere attorney-in-
fact for the PNB-IFL with full power and authority to, inter alia,
foreclose on the properties mortgaged to secure their loan
obligations with PNB-IFL.
○ Herein petitioner PNB is an agent with limited authority and
specific duties under a special power of attorney incorporated in
the real estate mortgage. It is not privy to the loan contracts
entered into by respondents and PNB-IFL.
Clearly, petitioner PNB not being a part to the contract has no power to
e-compute the interest rates set forth in the contract. Respondents,
herefore, do not have any cause of action against petitioner PNB.
However…
○ October 4, 1994 — The RTC in its Order ruled that since
PNB-IFL, is a wholly owned subsidiary of defendant PNB,
the suit against the defendant PNB is a suit against PNB-
IFL.
○ In justifying its ruling, the RTC, citing the case of Koppel
Phil. Inc. vs. Yatco, reasoned that the corporate entity may
be disregarded where a corporation is the 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.
R THE CORP ISSUE (Super long explanation on doctrine of piercing
f corporate fiction)
on: Has a personality distinct and separate from its
ers/members
● GR: As a legal entity, a corporation has a personality dis
separate from its individual stockholders or members, and is no
by the personal rights, obligations and transactions of the latter.
○ The mere fact that a corporation owns all of the
another corporation, taken alone is not sufficient to ju
being treated as one entity.
○ If used to perform legitimate functions, a subsidiary’s
existence may be respected, and the liability of th
corporation as well as the subsidiary will be confined
arising in their respective business.
○ The courts may in the exercise of judicial discretion
prevent the abuses of separate entity privilege and p
veil of corporate entity.
● Ruling in Koppel finds no application in the case at bar.
○ In said case, SC disregarded the separate existenc
parent and the subsidiary on the ground that the l
formed merely for the purpose of evading the payment
taxes.
○ In the case at bar, respondents fail to show any coge
why the separate entities of the PNB and PNB-IFL s
disregarded.
Doctrine of piercing the veil of corporate fiction; Circumstances
subsidiary a mere instrumentality (US Jurisprudence)
● While there exists no definite test of general application in de
when a subsidiary may be treated as a mere instrumentality of t
corporation, some factors have been identified that will ju
application of the treatment of the doctrine of the piercin
corporate veil.
● Garrett vs. Southern Railway Co. (factual background)
○ A suit against the Southern Railway Company
○ Plaintiff was employed by Lenoir Car Works and allege
sustained injuries while working for Lenoir. He, howev
suit against Southern Railway Company on the gro
Southern had acquired the entire capital stock of L
Works, hence, the latter corporation was but
instrumentality of the former.
○ The Tennessee SC stated that as a GR the stock o
alone by one corporation of the stock of another
thereby render the dominant corporation liable for th
the subsidiary unless the separate corporate existen
subsidiary is a mere sham, or unless the contro
subsidiary is such that it is but an instrumentality or a
the dominant corporation.
● The Circumstances rendering the subsidiary an instrumentalit
vs. Southern Railway Co.)
○ (a) The parent corporation owns all or most of th
stock of the subsidiary.
CORP 2-D Di
 ○ (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.
The Tennessee SC thus ruled: Only two of the eleven listed indicia
occur, namely, the ownership of most of the capital stock of Lenoir by
Southern, and possibly subscription to the capital stock of Lenoir. The
complaint must be dismissed.
of piercing the veil of corporate fiction; When applicable
PH jurisdiction: The doctrine of piercing the corporate veil is an
equitable doctrine developed to address situations where the
separate corporate personality of a corporation is abused or used
or wrongful purposes. ● In any case, the parent-subsidiary relationship between PNB a
○ The doctrine applies when the corporate fiction is used to
defeat public convenience, justify wrong, protect fraud or
defend crime, or when it is made as a shield to confuse the
legitimate issues, or where a corporation is the 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.
The test in determining the applicability of the doctrine of piercing the veil
of corporate fiction (Concept Builders, Inc. v. NLRC)
○ Three elements:
■ 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
to this transaction had at the time no
mind, will or existence of its own.
■ 2. Such control must have been used
defendant to commit fraud or wrong, to pe
the violation of a statutory or other posit
duty, or dishonest and, unjust act in contr
of plaintiffs legal rights; and,
■ 3. The aforesaid control and breach of d
proximately cause the injury or unju
complained of.
○ The absence of any one of these elements prevents
the corporate veil.”
○ In applying the “instrumentality” or “alter ego” doc
courts are concerned with reality and not form, with
corporation operated and the individual defendant’s re
to the operation.
Doctrine of piercing the veil of corporate fiction is NOT APPLICABLE T
AT BAR
● Aside from the fact that PNB-IFL is a wholly owned subs
petitioner PNB PNB, there is no showing of the indicativ
that the former corporation is a mere instrumentality of t
are present. Neither is there a demonstration that any of
sought to be prevented by the doctrine of piercing the c
veil exists.
● Inescapably, therefore, the doctrine of piercing the corporate v
on the alter ego or instrumentality doctrine finds no applicati
case at bar.
Agency issue: A suit against an agent, absent compelling reasons, is
against the principal (just in case it is asked)
IFL is not the significant legal relationship involved in this case
petitioner PNB was not sued because it is the parent company
IFL. Rather, the petitioner PNB was sued because it acte
attorney-in-fact of PNB-IFL in initiating the foreclosure proceedin
● A suit against an agent cannot without compelling reasons be co
a suit against the principal. Under the Rules of Court, every ac
be prosecuted or defended in the name of the real party-in
unless otherwise authorized by law or these Rules. In mandato
the Rules require that “parties-in-interest without whom
determination can be had, an action shall be joined either as p
defendants.”
● In the case at bar, the injunction suit is directed only against t
not the principal.
CORP 2-D Di
 issue: When an injunctive remedy may be granted (just in case it is

An injunctive remedy may only be resorted to when there is a pressing

necessity to avoid injurious consequences which cannot be remedied
under any standard compensation.
Clearly, respondents have failed to prove that they have a right protected
and that the acts against which the writ is to be directed are violative of
said right.

ve:
OF THE FOREGOING, the petition is hereby GRANTED. The assailed
of the Court of Appeals is hereby REVERSED. The Orders dated June
and October 4, 1999 of the Regional Trial Court of Makati, Branch 147 in
e No. 99-1037 are hereby ANNULLED and SET ASIDE and the
in said case DISMISSED.

CORP 2-D Di
 Umali v. CA
G.R. No.89561 | September 13, 1990 | REGALADO, J.
Digest by: SAN DIEGO
rs: BUENAFLOR C. UMALI, MAURICIA M. VDA. DE CASTILLO,
A M. CASTILLO, BERTILLA C. RADA, MARIETTA C. ABAÑEZ, LEOVINA
ENA AND SANTIAGO M. RIVERA
ents: COURT OF APPEALS, BORMAHECO, INC. AND PHILIPPINE
ERY PARTS MANUFACTURING CO., INC.
doctrine of piercing the veil applies when the corporate fiction is used to
at public convenience, justify wrong, protect fraud, or defend crime, or
it is made as a shield to confuse the legitimate issues, or where a
oration is the mere alter ego or business conduit of a person, or where the
oration is so organized and controlled and its affairs are so conducted as
ake it merely an instrumentality, agency, conduit or adjunct of another
oration.
egal corporate entity is disregarded only if it is sought to hold the officers
stockholders directly liable for a corporate debt or obligation.
Outline: Piercing the corporate veil is remedy of last resort and is not
able when other remedies are still available.
i et al. filed a complaint against Philippine Machinery Parts
ufacturing Co., Inc. (PM Parts), Insurance Corporation of the Philippines
, Bormaheco, Inc., (Bormaheco)
e Castillo (deceased) owns 4 parcels of land which is now owned by his
, Umali et al.
and was given as security for a loan contracted by Umali et al. from
heir failure to pay the amortization, foreclosure of the said property was
t to be initiated.
ago Rivera, proposed to them the conversion into a subdivision of the
to raise the necessary fund.
, Umali et al. executed an agreement with Slobec Realty and
lopment, Inc., represented by its President Santiago Rivera
s agreement, Rivera obliged himself to pay Umali et al. P470,000.00.
nwhile, Rivera approached Cervantes, President of Bormaheco, and
osed to purchase from Bormaheco 2 tractors
ec, through Rivera, executed in favor of Bormaheco a Chattel Mortgage
the tractors as security for the sale
urther security, Slobec obtained from ICP as surety and Slobec as
pal, in favor of Bormaheco
surety bond was in turn secured by an Agreement of Counter-Guaranty
Real Estate Mortgage (using the 4 parcels of land) executed by Rivera
esident of Slobec and Umali et al. as mortgagors and ICP as mortgagee.
● Meanwhile, for violation of the terms and conditions of the Counter-
Agreement, the land was foreclosed by ICP and were subsequently
by it
● ICP sold the lots to PM Parts
● PM Parts, through its President, Cervantes, sent a letter to Maurici
(Umali's relative) requesting her and her children to vacate th
property, but Mauricia refused.
● Umali as the appointed administratrix of the properties in question
action for annulment of title
● According to them, all the transactions are void for being entered int
and without the consent and approval of the CFI before w
administration proceedings has been pending.
Issue/s:
W/N The doctrine of piercing the corporate veil is available for Umal
holding the ICP et al liable - NO.
Ratio:
● CA found that the documents are valid and binding-upon the pa
there was no fraud employed by ICP et al.
● Findings of fact of said appellate court are final and conclusive a
binding on this Court in the absence of sufficient and convincing p
the former acted with grave abuse of discretion.
● An allegation of fraud will not prosper in this case where Umali et a
show that they were induced to enter into a contract through the
words and machinations of ICP et al. without which the former would
executed such contract
● Umali et al. seek to pierce the veil of, corporate entity of Bormaheco
PM Parts, alleging that these corporations employed fraud in ca
foreclosure and subsequent sale of the real properties belonging to t
● Under the doctrine of piercing the veil of corporate entity, when valid
therefor exist, the legal fiction that a corporation is an entity with
personality separate and distinct from its members or stockholder
disregarded. In such cases, the corporation will be considered a
association of persons.
● The members or stockholders of the corporation will be considere
corporation, that is, liability will attach directly to the officers and stoc
● The doctrine applies when the corporate fiction is used to defe
convenience, justify wrong, protect fraud, or defend crime, or when
as a shield to confuse the legitimate issues, or where a corporat
mere alter ego or business conduit of a person, or where the corpora
organized and controlled and its affairs are so conducted as to make
an instrumentality, agency, conduit or adjunct of another corporation
● The legal corporate entity is disregarded only if it is sought to hold th
and stockholders directly liable for a corporate debt or obligation.
● In the instant case, Umali et al. do not seek to impose a claim ag
individual members of the three corporations involved; on the con
CORP 2-D Di
e corporations which desire to enforce an alleged right against Umali et

ming that they were indeed defrauded by ICP et al. in the foreclosure of
gaged properties, this fact alone is not, under the circumstances,
ient to justify the piercing of the corporate fiction, since Umali et al. do
ntend to hold the officers and/or members of respondent corporations
onally liable therefor.
are merely seeking the declaration of the nullity of the foreclosure sale,
h relief may be obtained without having to disregard the aforesaid
orate fiction attaching to the corporations.
mere fact, therefore, that the businesses of two or more corporations are
elated is not a justification for disregarding their separate personalities,
nt sufficient showing that the corporate entity was purposely used as a
d to defraud creditors and third persons of their rights.
, piercing the veil of corporate entity is not the proper remedy in order
the foreclosure proceeding may be declared a nullity under the
mstances obtaining in the case at bar.

ve:
ORE, the decision of respondent Court of Appeals is hereby
ED and SET ASIDE, and judgment is hereby rendered declaring the
as null and void: (1) Certificate of Sale, dated September 28, 1973,
by the Provincial Sheriff of Quezon in favor of the Insurance Corporation
ilippines; (2) Transfer Certificates of Title Nos. T-23705, T-23706, T-
nd T-23708 issued in the name of the Insurance Corporation of the
s; (3) the sale by Insurance Corporation of the Philippines in favor of
Machinery Parts Manufacturing Co., Inc. of the four (4) parcels of land
by the aforesaid certificates of title; and (4) Transfer Certificates of Title
4846, T-24847, T-24848 and T-24849 subsequently issued by virtue of
in the name of the latter corporation.

ster of Deeds of Lucena City is hereby directed to cancel Transfer

es of Title Nos. T-24846, T-24847, T-24848 and T-24849 in the name of
Machinery Parts Manufacturing Co., Inc. and to issue in lieu thereof the
nding transfer certificates of title in the name of herein petitioners, except
Rivera.

going dispositions are without prejudice to such other and proper legal
as may be available to respondent Bormaheco, Inc. against herein
s.
ERED.

CORP 2-D Di
 Gregorio Araneta, Inc. v. Tuason de Paterno
G.R. No.L-2886 | Aug.22, 1952 | J. Tuason
Digest by: TORIO
rs: GREGORIO ARANETA, INC.
ents: PAZ TUASON DE PATERNO and JOSE VIDAL
The principle of piercing the corporate veil is resorted to by the courts as
e or protection against deceit and not to open the door to deceit.
ason de Paterno is the registered owner of big block of residential land
Mesa
ots were subdivided and were occupied by tenants who had lease
with right of first refusal
years 1940-1943, Tuason obtained several loans from Jose Vidal (Vidal)
g to P140 098. The loans were secured by mortgages executed over the
n later decided to sell her property to plaintiff Gregorio Araneta, Inc.
Inc).
xecuted an agreement to buy and sell. Some of the lessees exercised
of first refusal.
olute deed of sale was then executed over the remaining lots. The total
o be paid was P190k. The deed of sale contained a stipulation that
e vendor lose the checks issued, the vendee shall not be held liable for
. known principle that "The courts, at law and in equity, will disregard the
y after the consummation of the sale, Tuason tendered payment to Vidal
g the check drawn by Araneta, Inc. Vidal refused to accept the payment,
hat according to the Agreement, payment of the mortgage was not to be
otally or partially before the end of four years from April, 1943.
on, with the help of Atty. Ponce Enrile, filed an action against Vidal to
e latter to accept payment. The checks were deposited with the clerk of
e action was never tried and all the records, including the checks, were
g the war.
e war, the value of the property increased tremendously. Tuason is now
g the agreement to buy and sell and the absolute deed of sale. Araneta,
the present action to compel Tuason to deliver clear title to the lots
f the sale free from all liens and encumbrances. It also seeks the
on of the mortgage to Vidal. Vidal filed a cross-claim against Tuason to
the mortgage. Trial Court ruled in favor of Paterno.
Issue/s: Is the absolute deed of sale valid?-- YES
Ratio:
1. The trial court invalidated the sale on the ground that there's a
between terms of the agreement to buy and sell and the absolute dee
SC said that the trial court interpreted the agreement to buy and sell wro
of the conditions in Exhibit 1 is that the deed of sale is to be executed o
Tuason has already determined which lots she can validly dispose of.
lessees exercised their right to repurchase, she wa already in a position
remaining lots.
2. Tuason claims that the sale was effected through fraud because the d
was written in English, which she could not understand. The SC
argument is hard to believe because Tuason had an able attorney and a
was a "leading citizen and businessmen" who took part in the negotiation
3. Tuason also argued that the sale is invalid because Jose Araneta w
Tuason's agent AND the president of Araneta, Inc
.
a. The trial court said there was no agency relationship. But assuming t
principal- agent relationship between Tuason and Jose Araneta, the
said that Araneta Inc was the purchaser (not Jose), citing the w
distinction between the corporation and its stockholders.
b. [IMPORTANT] Tuason argues before the SC that the court should i
doctrine of separate juridical personality and apply to this case the o
corporate entity apart from the members of the corporation when it is atte
be used as a means of accomplishing a fraud or an illegal act." (ie the d
piercing the corporate veil)
The SC said that the principle of piercing the corporate veil does not ap
case. Gregorio Araneta, Inc. had long been organized and engaged in r
business. The corporate entity was not used to circumvent the law or p
deception. There is no denying that Gregorio Araneta, Inc. entered
contract for itself and for its benefit as a corporation. The contract and th
the parties who participated therein were exactly as they purported to be
fully revealed to the seller. There is no pretense, nor is there reason to
that if Paz Tuason had known Jose Araneta was the president of
Araneta, Inc., which she knew, she would not have gone ahead with
From her point of view and from the point of view of public interest, it wo
made no difference, except for the brokerage fee, whether Gregorio Ara
or Jose Araneta was the purchaser. Under these circumstances the
the suggested disregard of a technicality would be, not to
CORP 2-D Di
 ion of deceit by the purchaser but to pave the way for the evasion
imate and binding commitment by the seller. The principle invoked
efendant is resorted to by the courts as a measure or protection
deceit and not to open the door to deceit. "The courts," it has been
not ignore the corporate entity in order to further the perpetration of a
ven assuming that there was agency relationship, the relation between
nd Jose did not fall within the prohibition in Art. 1459 of the Civil Code.
neta was nothing more than a middleman between Tuason and Araneta
was not to sell and did not sell the property. He was not authorized to
a contract on behalf of Tuason.
war obligation and the moratorium as to such obligations has been a
unless the debtor has suffered war damages and has filed claim for them
no allegation or proof that she has. In the second place, the debtor herse
her creditor to be brought into the case which resulted in the filing of t
claim to foreclose the mortgage. In the third place, prompt settleme
mortgage is necessary to the settlement of the dispute and liquidation
Gregorio Araneta, Inc. and Paz Tuason. If for no other reason, Paz Tuas
do well to forego the benefits of the moratorium law.
There shall be no special judgments as to costs of either instance.

ve:
arize, the following are our findings and decision: Note: There were two MRs filed. Both were dismissed and court did not c
decision.
ract of sale Exhibit A was valid and enforceable, but the loss of the
or P143,150 and P12,932.61 and invalidation of the corresponding
to be borne by the buyer. Gregorio Araneta, Inc. the value of these
s well as the several payments made by Paz Tuason to Gregorio
Inc. shall be deducted from the sum of P190,000 which the buyer
to the seller on the execution of Exhibit 1.

r shall be entitled to the rents on the land which was the subject of the
s which may have been collected by Paz Tuason after the date of the

on shall pay Jose Vidal the amount of the mortgage and the stipulated
p to October 20,1943, plus the penalty of P30,000, provided that the
ained during the Japanese occupation shall be reduced according to the
e scale of payment, and provided that the date basis of the computation
penalty is the date of the filing of the suit against Vidal.

son shall pay the amount that shall have been found due under the
of mortgage within 90 days from the time the court's judgment upon the
n shall have become final, otherwise the property mortgaged shall be
old provided by law.

ortgage is superior to the purchaser's right under Exhibit A, which is

eclared subject to said mortgage. Should Gregorio Araneta, Inc. be
pay the mortgage, it will be subrogated to the right of the mortgagee.

e will be remanded to the court of origin with instruction to hold a

for the purpose of liquidation as herein provided. The court also shall
decide all other controversies relative to the liquidation which may have
rlooked at this decision, in a manner not inconsistent with the above
nd judgment.

tgagor is not entitled to suspension of payment under the debt

m law or orders. Among other reasons: the bulk of the debt was a pre-
CORP 2-D Di
 Boyer-Roxas v. CA
G.R. No.100866 | July 14, 1992. | Gonzales, Jr.
Digest by: YBAÑEZ
rs: REBECCA BOYER-ROXAS and GUILLERMO ROXAS
ents: HON. COURT OF APPEALS and HEIRS OF EUGENIA V. ROXAS,
of the veil of corporate fiction cannot be resorted under a theory of co-
p to justify continued use and possession by stockholders of corporate
s Guillermo; and that Guillermo's possession over the h
Respondent (original plaintiff in this case) is a corporation. It was
ncorporated with the primary purpose of engaging in agriculture to
develop the properties inherited from Eugenia V. Roxas and that of
Eufrocino Roxas; that the Articles of Incorporation of the plaintiff, in 1971,
was amended to allow it to engage in the resort business.
○ Incorporators were all members of the same family and became
members of the board.
○ Eufrocino Roxas has the biggest share, a majority stockholder.
○ Corporation put up a business called Hidden Valley Springs
Resort. The house near the Balubugan pool occupied by
Rebecca. It was intended to be a staff house but was converted
into her residence with husband Eriberto. The house was
allegedly built on corporate funds although the construction of
which was started by Rebecca.
○ Eriberto was the general manager when Eufrocino was still
alive. Eufrocino and Eriberto practically kept the corporation
running.
○ Rebecca’s son, Guillermo, also has a house in the area that
3 juridical personality of its own separate from the
was originally intended to be a recreation hall . It was also built
from corporate funds.
After the death of Eufrocino, Rebecca and Guillermo impeded the normal
operation of the resort. It was said that the corporation could not use its
own pavilions, kitchens, etc.
There were two (2) separate complaints for recovery of possession filed
with the RTC of Laguna against petitioners Rebecca Boyer-Roxas and
Guillermo Roxas.
○ Heirs of Eugenia Roxas Inc., prayed for the ejectment of the
petitioners from buildings inside the Hidden Valley Springs
Resort located at Limao, Calauan, Laguna allegedly owned by
respondent corporation.
e was originally made from nipa but when they converted it into a house, they used
on and other scraps from the set of Apocalypse Now, a film produced by Coppola. Coppola
aterials after making the film as payment for rent.
○ In the case of petitioner Rebecca, the respondent co
alleged that Rebecca is in possession of 2 houses, one
is still under construction, built at the expense of the re
corporation; and that her occupancy on the 2 houses
upon the tolerance of the respondent corporation.
○ In the case of petitioner Guillermo, the respondent co
alleged that Guillermo occupies a house which was b
expense of the former during the time when Guillermo
Eriberto, was still living and was the general manag
respondent corporation; that the house was originally
as a recreation hall but was converted for the resident
lot was only upon tolerance.
○ In both cases, the corporation alleged that the petition
paid rentals for the use of the buildings and the lots
they ignored the demand letters for them to va
buildings.
● RTC decided in favor of the corporation. CA affirmed.
● Petitioners now contend that the CA erred when it refused to p
veil of corporate fiction considering that Rebecca and Guill
owners of aliquot parts of the properties of the corporation.
Issue/s:
W/N the CA erred in refusing to pierce the veil of corporate fiction in
concerning alleged co-owners of the corporate property – NO
Ratio:
● The petitioners' suggestion that the veil of the corporate fiction
pierced is untenable. Piercing of the veil of corporate fiction c
resorted under a theory of co-ownership to justify continued
possession by stockholders of corporate properties
○ The respondent is a bona fide corporation. As such
composing it. Therefore, The corporation transacts its
only through its officers or agents.
○ The separate personality of the corporation may be dis
only when the corporation is used "as a cloak or cover
or illegality, or to work injustice, or where necessary t
equity or when necessary for the protection of the cred
● Eufrocino, who then controlled the management of the cor
consented to the petitioners' stay within the questioned p
Specifically,, Eufrocino Roxas gave his consent to the convers
recreation hall to a residential house, occupied by petitioner G
The Board of Directors did not object to the actions of Eufro
petitioners were allowed to stay within the questioned properti
Resolution was released by the Board approving the ejectio
petitioners.
CORP 2-D Di
Nothing is irregular in the Resolution of the board. Petitioners' stay within
he questioned properties was merely by tolerance of the respondent
corporation in deference to the wishes of Eufrocino, who during his
ifetime, controlled and managed the corporation. Eufrocino’s actions
could not have bound the corporation forever.

ve:
ORE, the present petition is partly GRANTED. The questioned decision
ourt of Appeals affirming the decision of the Regional Trial Court of
Branch 37, in RTC Civil Case No. 802-84-C is MODIFIED in that
raphs (c) and (d) of Paragraph 1 of the dispositive portion of the decision
ed. In their stead, the petitioner Rebecca Boyer-Roxas and the
nt corporation are ordered to follow the provisions of Article 448 of the
e as regard the questioned unfinished building in RTC Civil Case No.
. The questioned decision is affirmed in all other respects.

CORP 2-D Di
 Siain Enterprises v. Cupertino Realty Corp.
G.R. No. 170782 | June 22, 2009 | Nachura, J
Digest by: ZABALA
rs: SIAIN ENTERPRISES, INC
ents: CUPERTINO REALTY CORP. and EDWIN R. CATACUTAN
ear evidence support the fact that a corporation’s affiliates have received
ounts which became the consideration for the company’s execution of a
r its properties, the piercing doctrine shall be applied to support the fact
EM was valid and supported by proper consideration.
Siain Enterprises, Inc. obtained a loan of P37 Million from respondent
Realty Corporation (Cupertino) covered by a promissory note signed by
oners and Cupertinos respective presidents, Cua Le Leng and Wilfredo
To secure the loan, petitioner, on the same date, executed a real estate
mortgage over two (2) parcels of land and other immovables, such as
equipment and machineries
he parties executed an amendment to promissory note which provided
or a 17% interest pa on the P37M loan.
r, Cua Le Leng (Siain president) signed a second promissory note in
upertino for P160M. Cua Le Leng signed the second promissory note as
n behalf of petitioner, and as co-maker, liable to Cupertino in her
capacity.
Likewise, the parties executed an amendment of real estate mortgage,
which provided that the loan payable to Cupertino was increased from
P37m to P197M (since na-release na yung initial 37M plus 160M
additional, 197M na total loan) responsible officers and stockholders.
Note: the P160M was not received by Siain Enterprises directly, but
hrough its affiliates,Yuyek Manufacturing Corporation, Siain Transport,
nc., Cua Leleng and Alberto Lim, through various means such as
checks, debit memos and the pledges of the jewelries, condominium
units and trucks, all NOT in the name of petitioner Siain Enterprises but
he affiliates’.
r, Siain Enterprises wrote Cupertino and demanded the release of the
an. In its answer, Cupertino maintained that Siain Enterprises had long
the proceeds of the loan. It declared that Siain Enterprises’ demand for
se was merely an attempt to abscond from payment, as it already
d payment of the overdue interest on the loan covered by the first
y note.
pertinoCupertino instituted extrajudicial foreclosure proceedings over the
s subject of the amended REM, and scheduled its auction sale. This
Siain Enterprisesto file a complaint with a prayer for TRO to restrain the
auction. It contended that the REM was void for having no considerat
having received the P160M directly.
RTC and CA dismissed. Applying the doctrine of piercing the corporate
ruled that the REM had a consideration and therefore valid since the
which received the proceeds were mere alter egos of Siain Enterprises.
Issue/s: WON, applying the doctrine of piercing the veil, the RE
consideration --- YES
Ratio:
As a general rule, a corporation will be deemed a separate legal e
sufficient reason to the contrary appears. But the rule is not ab
corporations separate and distinct legal personality may be disregarded
veil of corporate fiction pierced when the notion of legal entity is used
public convenience, justify wrong, protect fraud, or defend crime
In this case, Cupertino presented overwhelming evidence that petitione
affiliate corporations had received the proceeds of the P160M loan increa
was then made the consideration for the Amended REM.
● That the checks, debit memos and the pledges of the
condominium units and trucks were constituted not exclusive
name of Siain Enterprises but also either in the name
Manufacturing Corporation, Siain Transport, Inc., Cua Leleng an
Lim is of no moment.
● For the facts established in this case calls for the application o
of piercing the veil of the corporate entity by virtue of which, the
personalities of the various corporations involved are dis
and the ensuing liability of the corporation to attach direc
The conjunction of the identity of the Siain Enterprises in relation
Transport, Inc., Yuyek Manufacturing Corp., as well as the individual per
of Cua Leleng and Alberto Lim has been indubitably shown by the followi
1. Siain and Yuyek have [a] common set of [incorporators], stockho
board of directors;
2. They have the same internal bookkeeper and accountant in the p
Rosemarie Ragodon;
3. They have the same office address at 306 Jose Rizal St., Mandaluyon
4. They have the same majority stockholder and president in the person
Leng; and
5. In relation to Siain Transport, Cua Le Leng had the unlimited authori
on herself, without authority from the Board of Directors, to use the fund
Trucking to pay the obligation incurred by the [petitioner] corporation.
Thus, it is crystal clear that [petitioner] corporation, Yuyek and Siain Tran
characterized by oneness of operations vested in the person of their
CORP 2-D Di
 Cua Le Leng, and unity in the keeping and maintenance of their
books and records through their common accountant and bookkeeper,
e Ragodon.

ently, these corporations are proven to be the mere alter-ego of their

Cua Leleng, and considering that Cua Leleng and Alberto Lim have
ng together as common law spouses with three children, this Court
that while Alberto Lim does not appear to be an officer of Siain and
onetheless, his receipt of certain checks and debit memos from Willie
Victoria Lua was actually for the account of his common-law wife, Cua
d her alter ego corporations.

e principle equally applies to Cupertino. Thus, while it appears that

nce of the checks and the debit memos as well as the pledges of the
ium units, the jewelries, and the trucks had occurred prior the date when
was incorporated, the same does not affect the validity of the subject
ns because applying again the principle of piercing the corporate veil,
actions entered into by Cupertino Realty Corporation, it being merely the
of Wilfredo Lua, are deemed to be the latters personal transactions and
a.

ve:
ORE, premises considered, the petition is DENIED. The Decision of the
Appeals in CA-G.R. CV No. 71424 is AFFIRMED. Costs against the

CORP 2-D Di
 Lipat v. Pacific Banking Corp.
G.R. No.142435 | April 30, 2003 | Quisumbing, J.
Digest by: AVILLON
rs: Estelita Burgos Lipat and Alfredo Lipat
ents: Pacific Banking Corporation, Register of Deeds, RTC Ex-officio
QC, Heirs of Eugenio Trinidad
e corporation is so organized and controlled and its affairs are conducted
is, in fact, a mere instrumentality or adjunct of the other, the fiction of the
entity of the instrumentality may be disregarded. The control necessary
the rule is not majority or even complete stock control but such
n of finances, policies and practices that the controlled corporation has,
ak, no separate mind, will or existence of its own, and is but a conduit for
al.
Petitioners Spouses Lipat owned Belas Export Trading (BET), a single
proprietorship with principal office in Cubao, QC. BET was engaged in
manufacture of garments.
Spouses Lipat also owned Mystical Fashions in the US, which sell goods
mported from the PH through BET.
Mrs. Lipat executed a special power of attorney appointing her daughter,
Teresita as atty-in-fact to obtain loans and other credit accommodations
rom Respondent Pacific Bank.
n 1979, Teresita was able to secure, on behalf of Mrs. Lipat and BET, a
oan from Pacific Bank This was secured with a real estate mortgage
over their property in Cubao.
Later that year, BET was incorporated into a family corporation named
Belas Export Corporation (BEC).
ts incorporators:
○ Spouses Lipat: 300 shares out of the 420 subscribed shares
○ Teresita: 20 shares
○ other close relatives and friends
Mrs. Lipat became President while Teresita became VP
The loan was restructured in the name of BEC and subsequent loans
were obtained by BEC and secured by promissory notes executed by
Teresita. A letter of credit was opened by Pacific Bank and BEC
executed the corresponding trust receipt. BEC also executed export bills.
All these transactions were secured by the real estate mortgage over the
Lipats property.
The PNs, export bills and trust receipt became due and BEC defaulted.
The mortgage was foreclosed and the property was sold to Respondent
Eugenio Trinidad.
Sps. Lipat filed a complaint for annulment of the real estate mortgage,
extrajudicial foreclosure and the certificate of sale issued over the
property, arguing:
○ that the promissory notes, trust receipt, and export bill
ultra vires as they were executed without the requis
resolution
○ that assuming said acts were valid,, the same
corporations sole obligation, it having a personality di
separate from spouses Lipat.
● Pacific Bank and Trinidad argue:
○ that the Lipats cannot evade payments of the valu
promissory notes, trust receipt, and export bills w
property because they and the BEC are one and the s
latter being a family corporation
Issue/s:
W/N the doctrine of piercing the veil of corporate fiction is applicable in t
YES
Ratio:
● A careful reading of the judgment of the RTC and the resolut
appellate court show that in finding petitioners mortgaged prop
for the obligations of BEC, both courts below relied upon the
doctrine or instrumentality rule, rather than fraud in piercing t
corporate fiction. When the corporation is the mere alter ego or
conduit of a person, the separate personality of the corporatio
disregarded. This is commonly referred to as the instrumentali
the alter ego doctrine, which the courts have applied in disrega
separate juridical personality of corporations
● Evidence that prove that BET and BEC are not separate
entities
○ Spouse Lipat were the owners of BET and were tw
incorporators and majority stockholders of BEC
○ both firms were managed by their daughter Teresita
○ both firms were engaged in the garment business,
products to Mystical Fashion
○ both firms held office in the same building owned by th
○ BEC is a family corporation with the Lipats as its
stockholders
○ the business operations of the BEC were so merged w
of Mrs. Lipat such that they were practically indistinguis
○ the corporate funds were held by Mrs. Lipat and the co
itself had no visible assets
○ Mrs. Lipat had full control over the activities of and
business matters of the corporation
○ Mrs. Lipat had benefited from the loans secured fro
Bank to finance her business abroad and from the e
secured by BEC for the account of Mystical Fashion
● BET and BEC are one and the same and the latter is a cond
merely succeeded the former.
CORP 2-D Di
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.

ve:
FORE, the petition is DENIED. The Decision dated October 21, 1999 and
ution dated February 23, 2000 of the Court of Appeals in CA-G.R. CV
6 are AFFIRMED. Costs against petitioners.
ERED.

CORP 2-D Di
 Ramirez Telephone Corp. v. Bank of America i) The bank should have known that Ruben
G.R. No. L-22614 | August 29, 1969| Capistrano, J. defendant in said civil case, has no persona
Digest by: BALAGTAS in Bank of America,
ii) And that the Ramirez Telco is an entirely dis
rs: Ramirez Telephone Corporation separate entity,
ents: Bank of America, E.F. Herbosa, The Sheriff of Manila, and CA
(1) Regardless of the fact that Ruben
happened to be its President and
While respect for the corporate personality as such is the general rule, Manager.
exceptions. In appropriate cases, the veil of corporate fiction may be (2) And the fact that Ruben Ramirez
administer the ends of justice. wife owned 75% of the stock
corporation.
Sorry if medj malabo, majority of the case was translated from Spanish) 16) In turn, the bank filed a counterclaim and a complaint against th
HERBOSA owned a building in Sta Mesa, 17) CFI: Ruled in favor of Ramirez
a) Which he leased to RUBEN RAMIREZ, a) CFI ordered Bank of America to pay 3k php and litigatio
i) The president of the Ramirez Telco. 18) CA: Reversed the CFI Ruling
The building was the workshop of the corporation, despite the head office a) Ruled that the Bank of America can garnish the
being in Escolta. Issue/s:
The rent however was not paid, W/N the CA erred in not applying the legal principle that a corporati
a) so HERBOSA filed an eviction claim against RAMIREZ. personality separate and distinct from that of its stockholders and thus
The CFI of Manila ruled in favor of HERBOSA (CFI Ordered Ramirez to of a corporation cannot be reached to satisfy the debt of its stockholders.
vacate)
The Sheriff of Manila, however, served a Garnishment Order upon the Ratio:
Bank of America, for a sum of 2,400PHP. 1) Ramirez Telcorp. maintain that its personality as an entity sep
The Bank replied that it did not hold any money for Ruben Ramirez; distinct from its major stockholders, Ruben R. Ramirez and his
But upon persistence of the Sheriff: not to be disregarded even if they did own 75% of the sto
a) It was found that the money was in the name of Ramirez corporation.
Telephone Inc. a) In Ramirez Telcorp’s opinion, its funds as a corporatio
The bank was willing to comply with the garnishment order. be garnished to satisfy the debts of a principal stockho
MONEY that Ramirez Telco had that day (Oct 17, 1950): 2) While respect for the corporate personality as such is the gen
a) 4,789.53 PHP there are exceptions.
Minus the garnishment: 3) In appropriate cases, the veil of corporate fiction may be pierced
a) 2,389.53 PHP 4) Ramirez Telcorp’s petition has no merit, in view of a number
The following day, Ramirez Telco withdrew 1,500PHP, decided by this Court.
a) Leaving a 889 PHP BALANCE a) The latest of which is Albert v. Court of First Instance re
Ruben Ramirez had also issued a check for 2,320 PHP a 1965 resolution in Albert v. University Publishing
a) In favor of Ray Electronics which stated that:
Said check was presented to Bank of America i) "Even with regard to corporations duly organ
a) The Bank rejected it for insufficiency of funds. existing under the law:
Ramirez Telcorp’s lawyer contacted Bank of America as to why the Bank (1) We have in many a case pierced t
ejected the check. corporate fiction to administer the
a) The Bank replied that they should obtain a release on the civil justice."
case involving Ruben Ramirez,
b) And that they are merely acting in accordance with the Dispositive:
garnishment order. PREMISES CONSIDERED, the judgment of the Court of Appeals of February 2
The lawyer for Ramirez Telco initiated an action on its behalf, affirmed, with costs against petitioner Ramirez Telephone Corporation.
a) Stating that:
Notes:
Translated with www.DeepL.com/Translator

CORP 2-D Di
 Telephone Engineering and Service Co. v. WCC
G.R. No. L-28694. | May 13, 1981 | MELENCIO-HERRERA, J.:
Digest by: BULATAO
rs: TELEPHONE ENGINEERING & SERVICE COMPANY, INC.
ents: WORKMEN'S COMPENSATION COMMISSION, PROVINCIAL
OF RIZAL and LEONILA SANTOS GATUS, for herself and in behalf of
children, Teresita, Antonina and Reynaldo, all surnamed GATUS
respect for the corporate personality as such, is the general rule, there
tions. In appropriate cases, the veil of corporate fiction may be pierced as
same is made as a shield to confuse the legitimate issues.
Telephone Engineering and Services, Co., Inc. (TESCO) is a domestic
corporation engaged in the business of manufacturing telephone
equipment with offices at Sheridan Street, Mandaluyong, Rizal.
ts Executive Vice-President and General Manager is Jose Luis
Santiago.
t has a sister company, the Utilities Management Corporation
UMACOR), with offices in the same location.
UMACOR is also under the management of Santiago.
UMACOR employed the late Pacifica L. Gatus as Purchasing Agent.
Gatus was detailed with TESCO.
He reported back to UMACOR.
Gatus contracted illness and although he retained to work, he died
nevertheless of "liver cirrhosis with malignant degeneration."
His widow, respondent Leonila S. Gatus, filed a "Notice and Claim for
Compensation" with the Regional Office of Quezon City, alleging therein
hat her deceased husband was an employee of TESCO, and that he
died of liver cirrhosis.
TESCO was transmitted the Notice and for Compensation, and was
equired to submit an Employer's Report of Accident or Sickness
pursuant to Section 37 of the Workmen's Compensation Act (Act No.
3428).
An "Employer's Report of Accident or Sickness" was submitted indicating
UMACOR as the employer of the deceased.
The Report was signed by Santiago.
The employer stated that it would not controvert the claim for
compensation, and admitted that the deceased employee contracted
llness "in regular occupation."
On the basis of this Report, the Acting Referee awarded death benefits in
he amount of P5,759.52 plus burial expenses of P200.00 in favor of the
heirs of Gatus in a letter-award against TESCO.
TESCO, through Jose Luis Santiago, informed the Acting Referee that it
would avail of the 15-days-notice given to it to state its non-conformity to
the award and contended that the cause of the illness cont
Gatus was in no way aggravated by the nature of his work.
● TESCO filed its "Motion for Reconsideration and/or Petition to
Award,” alleging as grounds therefor, that the admission ma
"Employer's Report of Accident or Sickness" was due to hones
and/or excusable negligence on its part, and that the illness
compensation is sought is not an occupational disease, he
compensable under the law.
● The Motion for Reconsideration was denied in an Order issue
Chief of Section of the Regional Office dated December
predicated on two grounds:
● That the alleged mistake or negligence was not excusable
● That the basis of the award was not the theory of direct causat
but also on that of aggravation.
● An Order of execution was issued by the same Office.
● TESCO filed an "Urgent Motion to Compel Referee to Ele
Records to the Workmen's Compensation Commission for Revie
● Meanwhile, the Provincial Sheriff of Rizal levied on and atta
properties of TESCO and scheduled the sale of the same
auction.
● TESCO filed with this Court, the present petition for "Certi
Preliminary Injunction" seeking to annul the award and to e
Sheriff from levying and selling its properties at public auction.
● The Court required Gatus to answer the Petition but denied Inju
● TESCO'S Urgent Motion for the issuance of a temporary r
order to enjoin the Sheriff from proceeding with the auction s
properties was denied.
● TESCO takes the position that the Commission has no jur
to render a valid award in this suit as there was no e
employee relationship between them, the deceased having
employee of UMACOR and not of TESCO.
● In support of this contention, petitioner submitted photostat cop
payroll of UMACOR for the periods May 16-31, 1967 and Ju
1967 12 showing the name of the deceased as one of
employees listed under the Purchasing Department of UMACOR
● It also presented a photostat copy of a check of UMACOR paya
deceased representing his salary for the period June 14 to July
13
● Both public and private respondents contend, on the oth
that TESCO is estopped from claiming lack of employer – e
relationship.
Issue/s:
W/N there was an employer-employee rationship between TESCO an
deceased husband. – YES.
Ratio:
CORP 2-D Di
The existence of employer-employee relationship is the jurisdictional SO ORDERED.
oundation for recovery of compensation under the Workmen's
Compensation Law.
The lack of employer-employee relationship, however, is a matter of
defense that the employer should properly raise in the proceedings
below.
The determination of this relationship involves a finding of fact, which is
conclusive and binding and not subject to review by the SC.
t is only in this Petition before the SC that petitioner denied, for the first
ime, the employer-employee relationship.
n fact, in its letter dated October 27, 1967 to the Acting Referee, in
ts request for extension of time to file Motion for Reconsideration,
n its "Motion for Reconsideration and/or Petition to Set Aside
Award," and in its "Urgent Motion to Compel the Referee to Elevate
Records to the Commission for Review," petitioner represented and
defended itself as the employer of the deceased.
Nowhere in said documents did it allege that it was not the employer.
Petitioner even admitted that TESCO and UMACOR are sister
companies operating under one single management and housed in
he same building.
Although respect for the corporate personality as such, is the general
ule, there are exceptions.
n appropriate cases, the veil of corporate fiction may be pierced as
when the same is made as a shield to confuse the legitimate issues.
While, indeed, jurisdiction cannot be conferred by acts or omission of the
parties, TESCO'S denial at this stage that it is the employer of the
deceased is obviously an afterthought, a devise to defeat the law
and evade its obligations.
This denial also constitutes a change of theory on appeal which is not
allowed in this jurisdiction.
ssues not raised before the Workmen's Compensation Commission
cannot be raised for the first time on appeal.
For that matter, a factual question may not be raised for the first time on
appeal to the Supreme Court.
An aggrieved party by the decision of a Commissioner should seek a
econsideration of the decision by the Commission en banc.
f the decision is adverse to him, he may appeal to the Supreme Court.
An appeal brought to the Supreme Court without first resorting to
he remedy referred to is premature and may be dismissed.
Although this rule admits of exceptions, as where public welfare and the
advancement of public policy so dictate, the broader interests of justice
so require, or where the Orders complained of were found to be
completely null and void or that the appeal was not considered the
appropriate remedy, 23 the case at bar does not fan within any of these
exceptions.

ve:
ORE, this Petition is hereby dismissed.
CORP 2-D Di
 Emilio Cano Enterprises v. CIR ● While it is an undisputed rule that a corporation has a p
G.R. No. L-20502 | February 26, 1965 | BAUTISTA ANGELO, J. separate and distinct from its members or stockholders beca
Digest by: CAPACITE fiction of the law, here we should not lose sight of the
Enterprises is a closed family corporation where the incorpor
rs: Emilio Cano Enterprises, Inc. (Enterprises) directors belong to one single family.
ents: Court of Industrial Relations, et al.
○ Here, the corporation and its members can be cons
one.
○ To hold such entity liable for the acts of its members
uch entity (closed family corporation) liable for the acts of its members is ignore the legal fiction but merely to give meanin
ore the legal fiction but merely to give meaning to the principle that such principle that such fiction cannot be invoked if its purp
nnot be invoked if its purpose is to use it as a shield to further an end use it as a shield to further an end subversive of justice
e of justice. ○ While a corporation is a legal entity existing separate
from the persons composing it, that concept ca
extended to a point beyond its reason and policy, a
Complaint for unfair labor practice - the ff (all Cano) were made invoked in support of an end subversive of this policy
espondents: be disregarded by the courts.
○ Emilio - as president and proprietor of Enterprises ● Emilio and Rodolfo were not indicted in their private capacitie
○ Ariston - as field supervisor president and manager of Enterprises.
○ Rodolfo - as manager ○ Having been sued officially their connection with the c
ncorporators of Enterprises: be deemed to be impressed with the representatio
○ Emilio corporation.
○ Juliana, his wife ● The court's order is for them to reinstate Cruz to her former p
○ Rodolfo and Carlos, his sons the corporation and incidentally pay her the wages she h
○ Ana, his daughter-in-law deprived of during her separation.
○ (no mention of Ariston) ○ Verily, the order against them is in effect ag
Emilio and Rodolfo - guilty, ordered to reinstate Honorata Cruz to her corporation.
ormer position with payment of backwages; Ariston - absolved for
nsufficiency of evidence Dispositive:
Emilio died. WHEREFORE, petition is dismissed, with costs.
4
○ Order of execution was directed against the properties of
Enterprises instead of the respondents.
Enterprises filed a motion to quash that the judgment was not rendered
against it which is a juridical entity separate from its officials.
○ Denied

judgment rendered against Emilio and Rodolfo in their capacities as

f Enterprises be made effective against the property of the latter which
party to the case? - YES

nstate Honorata Cruz to her former position as ordered in the decision; and (2) to
h the court the amount of P7,222.58 within ten days from receipt of the order,
h the court will order either a levy on respondents' properties or the filing of an
ontempt of court.
CORP 2-D Di
 Gabionza v. Court of Appeals
G.R. No. 161057 | September 12, 2008 | Tinga
Digest by: CHANG
rs: Betty Gabionza and Isabelita Tan
ents: CA, Luke Roxas and Evelyn Nolasco
Resolution explicitly identified the false pretense, fraudulent act or
t means perpetrated upon the investing public who were made to believe
HI had the financial capacity to repay the loans it enticed petitioners to
espite the fact that the deficient capitalization evidenced by its articles of
tion, the treasurer’s affidavit, the audited financial statements. “Moreover,
nt’s argument assumes that there is legal obligation on the part of
s to undertake an investigation of ASBHI before agreeing to provide the
ere is no such obligation. It is unfair to expect a person to procure every
public record concerning an applicant for credit to satisfy himself of the
nancial standing. At least, that is not the way an average person takes
s concerns.” (Based on the outline)
Roxas was the president of ASB Holdings, Inc. (ASBHI) while Nolasco
was the senior vice president and treasurer.
ASBHI was incorporated in 1996 with its declared primary purpose to
nvest in any and all real and personal properties of every kind or
otherwise acquire the stocks, bonds, and other securities or evidence of
ndebtedness of any other corporation, and to hold or own, use, sell, deal
n, dispose of, and turn to account any such stocks.
o ASBHI was organized with an authorized capital stock of P500k,
a fact shown in the articles of incorporation.
Gabionza and Tan had previously placed monetary investment with the
Bank of Southeast Asia (BSA).
o They alleged that they were convinced by the officers of
ASBHI to lend or deposit money with the corporation.
o At first, they were issued receipts reflecting the name ASB
Realty Development which they were told was the same entity
as BSA or was connected therewith, but beginning in March
1998, the receipts were issued in the name of ASBHI.
o They claimed that they were told that ASBHI was exactly
the same institution that they had previously dealt with.
ASBHI would issue 2 postdated checks to its lenders, one representing
he principal amount and the other covering the interest thereon. The
checks were drawn against DBS Bank and would mature in 30 to 45
days.
n the first quarter of 2000, DBS Bank started to refuse to pay for the
checks purportedly by virtue of stop payment orders from ASBHI.
● May 2000, ASBHI filed a petition for rehabilitation and rece
with the SEC, and it was able to obtain an order enjoining it fro
its outstanding liabilities.
● This led to the filing of the complaints by petitioners, toge
Christine Chua, Elizabeth Chan, Ando Sy and Antonio Villarea
ASBHI.
o Complaints: Estafa under Art. 315(2)(a) and (2)(d) of
violation of the Revised Securities Act and violatio
General Banking Act.
[Procedural part below.]
● The Task Force on Financial Fraud (Task Force) that was creat
DOJ to investigate the complaints lodged against ASBHI dism
complaint.
● Petitioners filed an MR but was denied in Feb 2001.
● With respect to the charges of estafa under Article 315(2) of
and of violation of the Revised Securities Act, the Tas
concluded that the subject transactions were loans which
only to civil liability; that petitioners never directly de
Nolasco and Roxas.
● 15 Oct 2001, then DOJ Sec. Hernando Perez issued a resolut
partially reversed the Task Force and instead directed the
five (5) Informations for estafa under Article 315(2)(a) of
and an Information for violation of Section 4 in relation to Sec
the Revised Securities Act.
● As the Informations were filed before the RTC of Makat
respondents assailed the DOJ Resolution by way of a certiora
with the CA.
● The CA reversed the DOJ and ordered the dismissal of the
cases. The dismissal was sustained when the CA denied p
MR. Hence, petitioners filed this case.
Issue/s:
● W/N the facts result in a prima facie case against either Roxas or
especially given that neither of them engaged in any face-to-face
with petitioners? Yes! There is probable cause.
Ratio:
● It is critical to know the key factual findings of the DOJ which
conclusion that probable cause existed against the respondents
● (I think that the SC agreed with the resolution of the DOJ
read the resolution carefully.)
● The DOJ Resolution states, to wit: (copy and pasted from the
“The transactions in question appear to be mere renewals of the
complainant-petitioners earlier granted to BSA. However, just after they
renew the loans, the ASB agents who dealt with them issued to them
indicating that the borrower was ASB Realty, with the representati
was the same entity as BSA or connected therewith. On the streng
CORP 2-D Di
 ation, along with other claims relating to the status of ASB and its
financial capacity to meet obligations, the complainant-petitioners
o lend the funds to ASB Realty instead. As it turned out, however, ASB
ct no financial capacity to repay the loans as it had an authorized capital
only P500,000.00 and paid up capital of only P125,000.00. Clearly, the
ations regarding its supposed financial capacity to meet its obligations to
lainant-petitioners were simply false. Had they known that ASB had in
uch financial capacity, they would not have invested millions of pesos.
o person in his proper frame of mind would venture to lend millions of
a business entity having such a meager capitalization. The fact that the
ant-petitioners might have benefited from its earlier dealings with ASB,
nterest earnings on their previous loans, is of no moment, it appearing
were not aware of the fraud at those times they renewed the loans.
e representations made by the ASB agents who dealt with the
ant-petitioners and who inveigled them into investing their funds in
properly imputable to respondents Roxas and Nolasco, because
ASBs president and senior vice president/treasurer, respectively, in
of its operations, directed its agents to make the false
tations to the public, including the complainant-petitioners, in order
nce them to invest their moneys in ASB. It is difficult to make a
conclusion, judging from the fact that respondents Roxas and Nolasco
ed and accepted for ASB the fraud-induced loans. This makes them
estafa under Article 315 (paragraph 2 [a]) of the Revised Penal
hey cannot escape criminal liability on the ground that they did not
y deal with the complainant-petitioners in regard to the transactions in
Suffice it to state that to commit a crime, inducement is as sufficient and
as direct participation.”(Read notes for elements of estafa by means of
The DOJ Resolution explicitly identified the false pretense,
raudulent act or fraudulent means perpetrated upon the
petitioners.
t narrated that petitioners were made to believe that ASBHI had the
inancial capacity to repay the loans it enticed petitioners to extend,
despite the fact that it had an authorized capital stock of only
P500,000.00 and paid up capital of only P125,000.00.
a. The deficient capitalization of ASBHI is evinced by its articles of
incorporation, the treasurer's affidavit executed by Nolasco, the
audited financial statements of the corporation for 1998 and the
general information sheets.
Even if ASBHI, was able to repay its initial loans does not negate the
raudulent misrepresentation or inducement it has undertaken to obtain
he loans in the first place.
a. The material question is not whether ASBHI inspired
exculpatory confidence in its investors by making good on its
loans for a while, but whether such investors would have
extended the loans in the first place had they know
financial setup.
● Even if ASBHI’s lack of financial and structural integrity is verifi
the articles of incorporation or other publicly available SEC r
does not follow that the crime of estafa through deceit would b
commission when precisely there are bending representations
company would be able to meet its obligations.
a. There is no obligation on the part of petitioners to und
investigation of ASBHI before agreeing to provide the l
unfair to expect a person to procure every availab
record concerning an applicant for credit to satisfy him
latters financial standing. At least, that is not the
average person takes care of his concerns.
● There is also the fact that ABSHI actually received the alleged
of money from petitioners. It is especially curious that accordi
ASBHI balance sheets, over Php 5B were booked as adv
stockholders when, according to the general information s
1999, Roxas owned 124,996 of the 125k subscribed s
ASBHI. Considering that ASBHI had an authorized capital
only P500k and a subscribed capital of P125k, it can be re
deduced that such large amounts booked as adva
stockholder could have only come from the loans extended
700 investors to ASBHI.
● The Court's conclusion is that the DOJ’s decision to prosecu
respondents is founded on sufficient probable cause, and the
determination of guilt or acquittal is best made through a full tr
merits. Indeed, many of the points raised by private responden
this Court, related as they are to the factual context surrou
subject transactions, deserve the full assessment and verificati
trial on the merits can accord.
Dispositive:
WHEREFORE, the petition is GRANTED. The assailed Decision and R
of the Court of Appeals dated 18 July 2003 and 28 November
REVERSED and SET ASIDE. The Resolutions of the Department of Just
Nos. 2000-1418 to 1422 dated 15 October 2001 and 3 July 2
REINSTATED. Costs against private respondents.
Notes:
● Article 315(2)(a) of the Revised Penal Code states:
ART. 315. Swindling (estafa). Any person who shall defraud another by a
means mentioned herein below shall be punished by:
xxx xxx xxx
(2) By means of any of the following false pretenses or fraudulent act
executed prior to or simultaneous with the commission of the fraud:
(a) By using a fictitious name, or falsely pretending to possess power
influence, qualifications, property, credit, agency, business or imaginar
transactions, or by means of other similar deceits;
CORP 2-D Di
The elements of estafa by means of deceit as defined under
Article 315(2)(a) of the Revised Penal Code are as follows:
here must be a false pretense, fraudulent act or fraudulent

uch false pretense, fraudulent act or fraudulent means must be

executed prior to or simultaneously with the commission of the

he offended party must have relied on the false pretense,

t act or fraudulent means, that is, he was induced to part with
y or property because of the false pretense, fraudulent act or
t means; and
s a result thereof, the offended party suffered damage.

CORP 2-D Di
 Yutivo Sons Hardware v. Court of Tax Appeals covering the period from the third quarter of 1947 to the fourth
G.R. No. L-13203 | January 28, 1961 | Gutierrez, J. 1949.
Digest by: CORPUS ○ They claim that the taxable sales were the retail
Southern Motors to the public and not the sales at w
rs: Yutivo Sons Hardware Company made by Yutivo to the latter inasmuch as Southern M
ents: Court Of Tax Appeals and Collector Of Internal Revenue
Yutivo were one and the same corporation, the former
subsidiary of the latter.
● This was disputed by the petitioner, and a reinvestigation of the
tion is an entity separate and distinct from its stockholders and from other made by the BIR.
on petitions to which it may be connected. However, "when the notion of ○ the Collector (in a letter) countermanded his demand
ty is used to defeat public convenience, justify wrong, protect fraud, or tax deficiency on the ground that "after several inves
ime," the law will regard the corporation as an association of persons, or conducted into the matter no sufficient evidence
se of two corporations merge them into one. When the corporation is the gathered to sustain the assessment of this Office b
er ego or business conduit of a person, it may be disregarded
the theory that Southern Motors is a mere instrum
or subsidiary of Yutivo." The withdrawal was
however, to the general power of review by the Boa
Yutivo Sons Hardware Co. is a domestic corporation. Prior to the last Appeals. The Secretary of Finance returned them
world war, Yuvito was engaged in the importation and sale of hardware respondent Collector for reinvestigation.
supplies and equipment. After the liberation, it resumed its business and ● · After another investigation, the Collector redetermined
until June of 1946 bought a number of cars and trucks from General aforementioned tax assessment was lawfully due the governme
Motors (GM). addition assessed deficiency sales tax due from petitioner fo
As importer, GM paid sales tax prescribed by sections 184, 185 and 186 quarters of 1950, with the last demand in the total sum of P2.2M
of the Tax Code on the basis of its selling price to Yutivo. Said tax being as follows:
collected only once on original sales, Yutivo paid no further sales tax on
ts sales to the public. Deficiency 75% Tota
n 1946, Southern Motors was organized to engage in the business of Sales Tax Surcharge
selling cars, trucks and spare parts. Its original authorized capital stock
was P1M divided into 10,000 shares with a par value of P100 each. Assessment (First) of P1,031,296.60 P773,473.45 P1,8
○ At incorporation, 2,500 shares worth P250k appear to have November 7, 1950 for
been subscribed into equal proportions by Yu Khe Thai, Yu deficiency sales Tax for the
Khe Siong, Hu Kho Jin, Yu Eng Poh, and Washington Sycip. period from 3rd Qrtr 1947 to
The first three named subscribers are brothers, being sons of 4th Qrtr 1949 inclusive
Yu Tiong Yee, one of Yutivo's founders. The latter two are
respectively sons of Yu Tiong Sin and Albino Sycip, who are Additional Assessment for 234,880.13 176,160.09 4
among the founders of Yutivo. period from 1st to 4th Qrtr
After the incorporation of Southern Motors, the cars and trucks 1950, inclusive
purchased by Yutivo from GM were sold by Yutivo to Southern Motors
which, in turn, sold them to the public in the Visayas and Mindanao. Total amount demanded per P1,266,176.73 P949,632.54 P2,2
○ When GM decided to withdraw from the Philippines in 1947, the letter of December 16, 1954
U.S. manufacturer of GM cars and trucks appointed Yutivo as
importer for the Visayas and Mindanao, and Yutivo continued its
previous arrangement of selling exclusively to Southern Motors. ● This was also contested by Yutivo before the CTA, alleging that
Yutivo, as importer, paid sales tax prescribed on the basis of its ○ there is no valid ground to disregard the corporate pers
selling price to Southern Motors, and since such sales tax, as Southern Motors and to hold that it is an adjunct of
already stated, is collected only once on original sales, Yutivo;
Southern Motors paid no sales tax on its sales to the public. ○ assuming the separate personality of Southern Motor
The Collector of Internal Revenue made an assessment upon Yutivo and disregarded, the sales tax already paid by Yutivo shou
demanded from the latter P1.8M as deficiency sales tax plus surcharge
CORP 2-D Di
 deducted from the selling price of Southern Motors in computing
the sales tax due on each vehicle; and
○ the surcharge has been erroneously imposed by respondent.
CTA — with Judge Roman Umali not taking part – disregarded Yutivo
and Southern Motor’s separate corporate existence. They sustained the
Collector's theory that
○ there was no legitimate purpose in the organization of
Southern Motors — the apparent objective of its organization
being to evade the payment of taxes what otherwise would be his taxes or altogether avoid them b
○ it was owned (or the majority of the stocks thereof are owned)
and controlled by Yutivo and is a mere subsidiary, branch,
adjunct, conduit, instrumentality or alter ego of the latter.
Of the two Judges who signed the decision, one voted for the
modification of the computation of the sales tax as determined by the
espondent Collector in his decision so as to give allowance for the
eduction of the tax already paid (resulting in the reduction of the
assessment to P820,509.91 exclusive of surcharges), while the other
voted for affirmance. The dispositive part of the decision, however,
affirmed the assessment made by the Collector.
Hence this petition.
W/N Southern Motors was organized for no other purpose than to evade
axes – NO. (Yutivo or Young) family. Southern Motors was organized by th
W/N Southern Motors was owned and controlled by Yuvito – YES. stockholders of Yutivo headed by Yu Khe Thai. During inco
W/N Court of Tax Appeals erred in the imposition of the 5% fraud
surcharge - YES. equal proportions by Yu Khe Thai, Yu Khe Siong, Yu Khe Jin
No. Southern Motors was organized in June 1946, when it could not
have caused Yutivo any tax savings. For a period of more than one year
after its incorporation, GM was the importer of the cars and trucks sold to
Yutivo, which, in turn resold them to Southern Motors. During that period,
GM as importer, was the one solely liable for sales taxes. Neither Yutivo
or Southern Motors was subject to the sales taxes on their sales of cars
and trucks. The sales tax liability of Yutivo did not arise until July 1, 1947
when it became the importer and simply continued its practice of selling
o Southern Motors. The decision, therefore, of the Tax Court that
Southern Motors was organized purposely as a tax evasion device runs
counter to the fact that there was no tax to evade.
Southern Motors was organized and it operated, under circumstance that
belied any intention to evade sales taxes. "Tax evasion" is a term that
connotes fraud thru the use of pretenses and forbidden devices to lessen
or defeat taxes. The transactions between Yutivo and Southern Motors,
however, have always been in the open, embodied in private and public
documents, constantly subject to inspection by the tax authorities. After
Yutivo became the importer of GM cars and trucks for Visayas and
Mindanao, it merely continued the method of distribution th
initiated long before GM withdrew from the Philippines.
○ Sections 184 to 186 of the said Code provides that the sales ta
collected "once only on every original sale, barter, exchange .
paid by the manufacturer, producer or importer." The use of
"original" and the express provision that the tax was collecti
only" evidently has made the provisions susceptible of
interpretations. A taxpayer has the legal right to decrease the a
which the law permits. A man may, therefore, perform an ac
honestly believes to be sufficient to exempt him from taxes. He
incur fraud thereby even if the act is thereafter found to be insuf
○ One other consideration would show that the intent to save ta
not have existed in the minds of the organizers of Southern Mo
sales tax imposed, in theory and in practice, is passed on to the
and is usually billed separately as such in the sales invoice. A
out by petitioner Yutivo, had not Southern Motors handled the
additional tax that would have been payable by it, could have be
passed off to the consumer.
2. Yes. Yutivo, which is engaged principally in hardware sup
equipment, is completely controlled by the Yutivo, Young or Yu
○ The founders of the corporation are closely related to each ot
by blood or affinity, and most of its stockholders are members
2,500 shares worth P250,000.00 appear to have been subscr
Poh and Washington Sycip. The first three named subscr
brothers, being the sons of Yu Tien Yee, one of Yutivo's foun
Eng Poh and Washington Sycip are respectively sons of Yu T
and Alberto Sycip who are co-founders of Yutivo.
○ According to the Articles of Incorporation of the said subscrip
amount of P62,500 was paid by the aforenamed subscribers, bu
the said sum was advanced by Yutivo. The additional subscr
the capital stock of Southern Motors and subsequent transfer
were paid by Yutivo itself. The payments were made without an
of funds from Yutivo to Southern Motors. Yutivo simply cha
accounts of the subscribers for the amount allegedly advanced
in payment of the shares. Whether a charge was to be made a
accounts of the subscribers or said subscribers were to subscrib
appears to constitute a unilateral act on the part of Yutivo, there
showing that the former initiated the subscription.
○ The transactions were made solely by and between Southern M
Yutivo. In effect, it was Yutivo who undertook the subscription o
employing the persons named or "charged" with corresponding
as nominal stockholders. The shareholders in Southern Motors
nominal stockholders holding the shares for and in behalf of Y
even conceding that the original subscribers were stockholders
CORP 2-D Di
Yutivo was at all times in control of the majority of the stock of Southern
Motors and that the latter was a mere subsidiary of the former.
While Yutivo and other recorded stockholders transferred their
shareholdings, the transfers were made to their immediate relatives,
either to their respective spouses and children or sometimes brothers or
sisters. Yutivo's shares in Southern Motors were transferred to
mmediate relatives of persons who constituted its controlling
stockholders, directors and officers. Despite these purported changes in
stock ownership in both corporations, the Board of Directors and officers
of both corporations remained unchanged.
All cash assets of SM were handled by Yutivo and all cash transactions
of SM were actually maintained thru Yutivo. Any and all receipts of cash
by SM including its branches were transmitted or transferred immediately
and directly to Yutivo in Manila upon receipt thereof. Likewise, all
expenses, purchases or other obligations incurred by SM are referred to
Yutivo which in turn prepares the corresponding disbursement vouchers
and payments.
Consideration of various other circumstances, especially when taken
ogether, indicates that Yutivo treated SM merely as its department or
adjunct. Even the branches of SM in Bacolod, Iloilo, Cebu, and Davao
reat Yutivo — Manila as their "Head Office" or "Home Office" as shown
by their letters of remittances or other correspondences.
Yutivo financed principally, if not wholly, the business of SM and actually
extended all the credit to the latter not only in the form of starting capital
but also in the form of credits extended for the cars and vehicles
allegedly sold by Yutivo to SM as well as advances or loans for the
expenses of the latter when the capital had been exhausted.
Yes. Pursuant to Section 183 of the National Internal Revenue Code the
50% surcharge should be added to the deficiency sales tax "in case a
alse or fraudulent return is willfully made." No element of fraud is
present.Although the sales made by SM are in substance by Yutivo this
does not necessarily establish fraud nor the willful filing of a false or
raudulent return.
When GM was the importer and Yutivo, the wholesaler, of the cars and
rucks, the sales tax was paid only once and on the original sales by the
ormer and neither the latter nor SM paid taxes on their subsequent
sales. Yutivo might have honestly believed that the payment by it, as
mporter, of the sales tax was enough as in the case of GM.
Consequently, in filing its return on the basis of its sales to SM and not
on those by the latter to the public, it cannot be said that Yutivo
deliberately made a false return for the purpose of defrauding the
government of its revenues which will justify the imposition of the
surcharge penalty.

ve:
OF THE FOREGOING, the decision of the Court of Tax Appeals under
hereby modified in that petitioner shall be ordered to pay to respondent
f P820,549.91, plus 25% surcharge thereon for late payment.
CORP 2-D Di
 Padilla v. Court of Appeals
G.R. No. 123893 | November 22, 2001 | Quisumbing J.
Digest by: CRUZ
rs: Luisito Padilla and Phoenix-Omega Development and Management
on
ents: CA and Susana Realty Inc.
The general rule is that a corporation is clothed with a personality
and distinct from the persons composing it. It may not be held liable for
ations of the persons composing it, and neither can its stockholders be
e for its obligations. This veil of corporate fiction may only be disregarded
where the corporate vehicle is being used to defeat public convenience,
ong, protect fraud, or defend crime.
On June 27, 1983, Susana Realty, Inc. (SRI), by a deed of absolute
sale, sold to the Light Rail Transit Authority (LRTA) several parcels of
and located in Taft Avenue Extension, San Rafael District, Pasay City.
Under paragraph 7 of the deed of sale, SRI reserved to itself the right of
irst refusal to develop and/or improve the property sold should the LRTA
decide to lease and/or assign to any person the right to develop and/or
mprove the property.
The LRTA and Phoenix Omega Development and Management
Corporation (Phoenix Omega) entered into a Commercial Stall
Concession Contract authorizing the latter to construct and develop
commercial stalls on a 90 sq. m. portion of the property bought from SRI.
SRI opposed the agreement as having violated the deed of sale it
entered with LRTA.
A tripartite agreement was later concluded by the parties, however,
whereby SRI agreed to honor the terms of the concession contract and
o lease to Phoenix Omega its (SRI's) property (remaining property)
adjacent to the 90 sq. m. portion subject of the concession contract.
A contract was thus entered into on July 28, 1988 between Phoenix
Omega and SRI with LRTA whereby Phoenix Omega undertook to
construct commercial stalls on the 90-sq. m. property in accordance with
plans and specifications prepared by the latter, the construction to begin,
however, only upon SRI's approval of such plans and specifications.
Also on July 28, 1988, Phoenix Omega, by a deed of assignment,
assigned its right and interests over the remaining property unto its sister
company, PKA Development and Management Corporation (PKA).
Signatories to the deed of assignment were Eduardo Gatchalian in his
capacity as President of Phoenix Omega, and Luisito B. Padilla (Padilla),
one of the petitioners herein, in his capacity as President and General
Manager of PKA.
The development of the remaining property having been assigned to
PKA, it entered into a contract of lease with SRI likewise on July 28,
1988.
● In the meantime, SRI sold part of its remaining property to a thir
● An amended contract of lease was thus forged in January 198
SRI, PKA and Phoenix Omega, whereby the parties agreed to
the already sold portion of SRI's remaining property with 2 parce
also belonging to SRI. In this amended contract of lease, PKA w
represented by Padilla in his capacity as its President and
Manager.
● And Phoenix Omega, which was not a party to the July 28, 19
contract sought to be amended but which was a party, to the
contract, was also represented by Padilla as Chairman of the
Directors of Phoenix Omega.
● PKA's building permit was later revoked due to certain violatio
National Building Code
● On August 24, 1989, PKA was allowed by the (Department)
Works and Highway(s) to resume construction on the leased
subject to PKA's correction of the defects in the construction to
to BP 344.
● As SRI's approval of PKA's amended plans in the construc
required, PKA transmitted the same to SRI which withheld
thereof pending PKA's correction of the defects in the constructi
● Repeated requests for approval of its amended plans not hav
heeded by SRI, PKA filed at the court a quo the action a
rescission of contract of lease against SRI, alleging that SRI's
approve the plans without any justifiable reason deprived it of t
the commercial stalls, thereby incurring losses.
● SRI, upon the other hand, claimed that it was PKA which vio
terms of their contract, alleging that PKA failed to complete
months the construction of the commercial stalls during which
was not paying any rentals and that PKA undertook the co
without first having its plans approved."
● RTC rendered its decision, as follows:
● 1. Declaring the rescission and termination of the Contract of L
amended, and the passing in ownership of all the improvem
existing on the premises, and ordering plaintiff to surrender po
of the leased premises to the defendant.
● 2. Ordering PKA to pay to the SRI sums of money
● CA affirmed the RTC decision
● A writ of execution was issued in due course by the RTC
● Possession of the subject properties was subsequently restore
but the monetary award was left unsatisfied.
● SRI filed a motion for issuance of an alias writ against herein p
based on the trial court's observation that PKA and Phoeni
are one and the same entity.
● This was granted by the RTC in an order which reads: "WHER
as prayed for by the defendant-judgment creditor Susana Realt
an alias writ of execution issue against the properties, both
personal, of PKA Development and Management Corpor
Phoenix-Omega Development Corporation, and of Luisito B
CORP 2-D Di
or the enforcement of the decision dated January 7, 1991, promulgated
by this Court, the same be implemented by deputy sheriff Edilberto A.
Santiago."
The RTC issued an alias writ on the same day pursuant to the above
order
Alleging that the writ of execution cannot be enforced against them,
Padilla and Phoenix filed with the RTC an omnibus motion for the
econsideration and for annulment of the alias writ
Padilla and Phoenix assailed these orders as confiscatory, since they
were never parties to the case filed by PKA against SRI, and they
were unable to present evidence on their behalf.
The motion was denied
CA also denied the petition
RTC’s issuance of the alias writ of execution can be enforced against
d Phoenix? NOOOOOooooooo
A court acquires jurisdiction over a person through either a valid service
of summons or the person's voluntary appearance in court.
A court must necessarily have jurisdiction over a party for the latter to be
bound by a court decision.
Generally accepted is the principle that no man shall be affected by any
proceeding to which he is a stranger, and strangers to a case are not
bound by judgment rendered by the court
n the present case, we note that the trial court never acquired
urisdiction over petitioners through any of the modes mentioned
above. Neither of the petitioners was even impleaded as a party to the
case.
Without the trial court having acquired jurisdiction over petitioners, the
atter could not be bound by the decision of the court.
Execution can only be issued against a party and not against one who
was not accorded his day in court.
The courts a quo ruled that petitioner Padilla, in particular, had his day in
court. As general manager of PKA, he actively participated in the case in
he trial court. He "ha(d) the right to control the proceedings, to make
defense, to adduce and cross examine witnesses, and to appeal from a
decision." Therefore, Padilla and Phoenix-Omega, of which Padilla is
chairman of the board, could not now argue that they did not have the
opportunity to present their case in court, according to private
espondent.
To begin with, it is clear that Padilla participated in the proceedings
below as general manager of PKA and not in any other capacity.
The fact that at the same time he was the chairman of the board of
Phoenix-Omega cannot, by any stretch of reasoning, equate to
participation by Phoenix-Omega in the same proceedings. W
stress that Phoenix-Omega was not a party to the case
could not have taken part therein.
● SRI, however, insists that the trial court had pierced the veil of
fiction protecting petitioners, and this justifies execution aga
properties.
● The general rule is that a corporation is clothed with a pe
separate and distinct from the persons composing it. It ma
held liable for the obligations of the persons composin
neither can its stockholders be held liable for its obligations
● This veil of corporate fiction may only be disregarded
where the corporate vehicle is being used to defea
convenience, justify wrong, protect fraud, or defend crime.
● PKA and Phoenix-Omega are admittedly sister companies, an
sharing personnel and resources, but we find in the present
allegation, much less positive proof, that their separate
personalities are being used to defeat public convenience, just
protect fraud, or defend crime.
● "For the separate juridical personality of a corporation to be dis
the wrongdoing must be clearly and convincingly established.
be presumed." We find no reason to justify piercing the corpor
this instance.
● We understand private respondent's frustration at not being abl
the monetary award in their favor satisfied. But given the circu
of this case, public respondent cannot order the seizure of p
properties without violating their constitutionally enshrined rig
process, merely to compensate private respondent.
Dispositive:
WHEREFORE, the instant petition is GRANTED. The assailed dec
resolution of the Court of Appeals in CA-G.R. SP No. 36685 are SET AS
the order of the trial court dated November 29, 1994 and the alia
execution issued on the same date in connection with Civil Case No.
declared NULL and VOID.
CORP 2-D Di
 Mayor v. Tiu
G.R. No. 203770 | November 23, 2016 | MENDOZA, J.
Digest by: CUA
rs: Manuela Azucena Mayor
ents: Edwin Tiu and Damiana Charito Marty
p by a single stockholder or another corporation of all or nearly all of the
ocks of a corporation is not of itself a sufficient reason for disregarding the
separate corporate personalities. To disregard the separate personality
g doing cannot be presumed but must be clearly and convincingly
ed
Rosario, the widow of Primo passed away leaving a holographic last will
and testament
There she named her sister Remedios and her niece, Manuela as
executors
Remedios and Manuel filed a petition for the probate of Rosario’s
holographic will
A few days later Marty, claiming to be the adopted daughter of Rosario
iled a petition for letters of administration. It was not given due course
because of the probate proceedings.
RTC found the petition for probate of will filed by Remedios and Manuela
as sufficient in form and substance and set the case for hearing
Marty filed motion stating that Remedios kept Rosario a virtual hostage
or the past ten years and her family was financially dependent on her
which led to the disposal of her and her husband’s properties.
Marty averred that until the will of the descendent could be probated and
admitted, Remedios and her ten children had no standing to possess or
control the properties.
She prayed for the probate court to 1.) make immediate inventory of all
he properties 2.) direct tenants (Mercury Drug, Chowking) located at
Primrose Hotel to deposit their rentals with the court 3.) direct Metrobank
o freeze the accounts in the name of Rosario and Primrose
Development 4.) lock up the Primrose Hotel in order to preserve the
property
Remedios and Manuela claim that Marty was not an adopted child and
hat the probate court had no jurisdiction over the properties mistakenly
claimed by Marty as part of Rosario’s estate as the properties were
actually owned by Primrose
Marty in her reply cited a CFI order claiming that the veil of corporate
entity of Primrose was pierced on the ground that it was a closed family
corporation controlled by Rosario and Primo’s death.
Thus Marty alleged that the piercing was proper in the case as the
ncorporation of Primrose was founded on a fraudulent consideration,
having been done in contemplation of Primo’s death.
● The RTC granted the motion of Marty and appointed a
administrator of the estate. The probate court also ordered
and Chowking to deposit its rental income with the court and M
to freeze the bank accounts mentioned in the motion of M
doctrine of piercing the corporate veil was applied conside
Rosario had no other properties comprising her estate
● Remedios and Manuela filed a motion for inhibition and later a
cautelam
○ They argued that Rosario’s estate consisted only of
stock in Primrose and not the corporation itself
○ Thus the probate court could not order lessees to
rentals to the estate’s administrators. They also insiste
special administrator be recalled
● RTC denied the mr
● CA reversed the orders except as to the appointment of
administrator. Court held that Primose had a personality sep
distinct from the estate and thus the probate court had no juris
apply the doctrine of piercing the corporate veil
○ When the probate court applied the doctrine of "pie
effect, it adjudicated with finality the ownership of the p
in favor of the Estate.
○ CA stated that RTC had no jurisdiction to adjudicate o
of a property claimed by another based on adverse
that questions like this must be submitted to a court o
jurisdiction and not to a probate court.
● Even if the court’s determination on ownership was merely in
be provisional, the properties claimed are registered under the
system
● As such Primrose was considered owner until the titles were n
an appropriate ordinary action
● The CA further stated that the RTC erroneously relied on
issued by the CFI Leyte in 1981, in the probate proceedings inv
estate of Primo. Whatever determination the CFI made at
regarding the title of the properties was merely provisional, h
conclusive as to the ownership.
● By reason of the favorable decision by the CA, Remedios and
filed a motion to partially revoke the write of execution. RTC gr
motion and revoked the power of the special administrator to ov
operations of Primrose and revoked orders with respect to Mer
and Chowking
● 10 months after the order, Marty filed an Omnibus motion pr
the probate court to 1.) order accounting of all properties 2.) d
rental payments and 3.) prohibit the disbursement of funds c
the estate without formal motion and approval by the probate co
● RTC granted Marty’s Omnibus motion. Although it agreed wi
decision reversing the previous RTC order, the court acknowle
urgency and necessity of appointing a special administrator
● The court directed the following:
CORP 2-D Di

○ 1. DIRECTS petitioners, either individually or jointly, to: (a)
RENDER AN ACCOUNTING of all the properties and assets
comprising the estate of the decedent that may have come into
their possession; and, (b) DEPOSIT OR CONSIGN all the
rentals payments or such other passive incomes from the
properties and assets registered in the name of Primrose
Development Corporation, including all income derived from
the Primrose Hotel and the lease contracts with Mercury Drug
and Chowking Restaurant, both within fifteen (15) days from
receipt of this Order; nearly all of the capital stocks of a corporation is not o
○ 2. DIRECTS the Special Administrator to take possession and
charge of the properties comprising the decedent's estate,
specially those pertaining to the shareholding of the decedent in
Primrose Development Corporation, to determine whether or
not action for the recovery of the shares of stock supposedly
transferred from the decedent to petitioners Remedios Tiu,
Manuela Azucena Mayor should be instituted in the name of the
estate against the said transferees and to submit a Report on
the foregoing matters to this Court, within fifteen (15) days from
receipt of this Order; and, administrator.
○ 3. ORDERS that no funds comprising the estate of the decedent
shall be disbursed without formal Motion therefor, with the
conformity of the Special Administrator, duly approved by this
Court. to the Torrens title of Primrose over Marty's arguments of
CA dismissed the MR field by Remedios and Manuela
Later Manuela filed a motion for issuance of TRO and writ of preliminary
njunction on the ground that the probate court ordered an inventory of
he assets of Primrose, as separate and distinct entity.
mrose is a separate and distinct entity? YES
The estate of the deceased person is a juridical person separate and
distinct from the person of the decedent and any other corporation. This
status of an estate comes about by operation of law. This is in
consonance with the basic tenet under corporation law that a corporation
has a separate personality distinct from its stockholders and from other
corporations to which it may be connected.
The doctrine of piercing the corporate veil has no relevant application in
his case. Under this doctrine, the court looks at the corporation as a
mere collection of individuals or an aggregation of persons undertaking
business as a group, disregarding the separate juridical personality of the
corporation unifying the group.
● The purpose behind piercing a corporation's identity is to re
barrier between the corporation and the persons comprising it
the fraudulent and illegal schemes of those who use the
personality as a shield for undertaking certain proscribed activiti
● Instead of holding the decedent's interest in the corporation s
as a stockholder, the situation was reversed. The probate cour
the lessees of the corporation to remit rentals to the
administrator without taking note of the fact that the deceden
the absolute owner of Primrose but only an owner of shares
● Ownership by a single stockholder or another corporation
sufficient reason for disregarding the fiction of separate c
personalities. To disregard the separate personality th
doing cannot be presumed but must be clearly and con
established
● It is a well-settled rule that a probate court or one in c
proceedings cannot adjudicate or determine title to properties c
be part of the estate but which are equally claimed to belong t
parties.
● The court can only determine whether they should, or shoul
included in the inventory or list of properties to be oversee
● If there is a dispute the administrator and the opposing par
to resort to an ordinary action for the final determinatio
conflicting claims of title because the probate court cannot
● The probate court should have recognized the incontestability
dissipation of properties.
○ If a property covered by Torrens title is involv
presumptive conclusiveness of such title should be g
weight, and in the absence of strong compelling eviden
contrary, the holder thereof should be considered as t
of the property in controversy until his title is nullified or
in an appropriate ordinary action, particularly, when
case at bar, possession of the property itself is in the
named in the title.
● The records of this case would show that that no compelling
was ever presented to substantiate the position of Marty that Ro
Primrose were one and the same, justifying the inclusion of th
properties in the inventory of the decedent's properties.
● At most Rosario owned shares of stock in Primrose, a sepa
distinct personality from the estate of the decedent
● Furthermore the probate court has not acquired jurisdic
Primrose and its properties. Piercing the veil applies to determ
liability not of jurisdiction
● It is not available to confer on the court a jurisdiction it has not
To apply this doctrine, it is imperative that the court must
jurisdiction over the corporation
CORP 2-D Di
ve:
ORE, the petition is GRANTED. The Temporary Restraining Order,
ne 14, 2013, is hereby made PERMANENT, effective immediately. The
Trial Court, Branch 6, Tacloban City, is ENJOINED from enforcing and
ting its January 20, 2011 and June 10, 2011 Orders, insofar as the
properties of Primrose Development Corporation are concerned, to
parable damage to a corporate entity, separate and distinct from the
Rosario Guy-Juco Villasin Casilan.

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 McConnel v. Court of Appeals
G.R. No.L-10510 | March 17, 1961 | Reyes, J.B.L., J Ratio:
Digest by: DA SILVA ● The corporation in question is a mere instrumentality of the
stockholders, hence the latter must individually answer for the
rs: M. Mc Connel, W.P. Cochrane, Ricardo Rodriguez, Et al. obligations. While the mere ownership of all or nearly all of th
ents: CA, Dominga De Los Reyes, Sabino Padilla
stock of a corporation is a mere business conduit of the stockho
conclusion is amply justified where it is shown, as in the pres
To hold the individual stockholders liable for the corporation’s obligations that the operations of the corporation were so merged with tho
ignore the corporation as a separate entity, but merely to apply the stockholders as to be practically indistinguishable from them. To
ed principle that such entity cannot be invoked for purposes that could not individual stockholders liable for the corporation’s obligations
n intended by the law creating the corporation itself. ignore the corporation as a separate entity, but merely to
established principle that such entity cannot be invoked for purp
could not have been intended by the law creating the corporatio
The Court of appeals found that the Park Rite Co., a Philippine
corporation, was originally organized on or about April 15, 1947
○ It had a capital stock of 1,500 shares at P1.00 per share. Dispositive:
The Company leased from Rafael Rosales y Samanillo a vacant lot on Finding no error in the judgment appealed from, the same is hereby affir
Juan Luna street, which it used for parking motor vehicles for a costs against petitioners-appellants Cirilo Paredes and Ursula Tolentino.
consideration
t turned out that in operating its business, the corporation occupied and
used not just the lot it leased from Samanillo, but an adjacent lot
belonging to respondents-appellees Padilla, without their knowledge and
consent.
○ upon learning of the use of their lot around October, 1947,
respondents demanded payment for use and occupation of the
lot
The corporation (controlled by Cirilo Parades and Ursula Tolentino, who
purchased and held 1,496 of the 1500 shares) disclaimed liability, and
blamed the original incorporators, McConnel, Rodriguez and Cochrane.
Judgment was rendered in due course ordering Park Rite Co to pay
P7,410.00 plus legal interest as damages from April 15,1947 until return
of the lot. Restitution not having been made until Jan 31 1948, the
udgment amounted to P11,732.50.
Upon execution of judgment, the corporation was found to be without
assets other than P550 deposited in Court.
After application to the judgment credit, there remained a balance of
P11,182.5 outstanding and unsatisfied
The judgment creditors then filed suit in the CFI of Manila against the
corporation, and its past and present stockholders to recover from them,
ointly and severally, the unsatisfied balance of the judgment, plus legal
nterest and costs.
CFI denied recovery, but CA reversed
Hence the present petition on certiorari

individual stockholders may be held liable for obligations contracted by

ration – YES
CORP 2-D Di
 Jacinto v. Court of Appeals
G.R. No. 80043 | June 6, 1991 | Davide, Jr., J.
Digest by: DE GUZMAN
rs: Roberto A. Jacinto
ents: Honorable Court of Appeals and Metropolitan Bank and Trust
When the veil of corporate fiction is made as a shield to perpetuate fraud
nfuse legitimate issues, the same should be pierced.
ine: There is no denial of due process to hold officers liable under the
doctrine, provided that evidential basis has been adduced during trial to
piercing doctrine.
This is an appeal by certiorari to partially set aside the Decision of CA
which affirmed in toto the decision of the RTC of Manila, Branch 11.
The RTC found that Jacinto was in fact the corporation itself known as
nland Industries, Inc. He admitted that he was both its President and
General Manager, as well as a substantial stockholder (52% with his
wife). He was also the one who entirely dealt with the transaction of
Metrobank through the trust receipts he signed with no indication as to in
what capacity.
Said decision ordered Roberto Jacinto and Inland Industries, Inc. to
ointly and severally pay Metrobank for 382,015.80 pesos, with 16%
nterest and attorney’s fees.
Jacinto argued that he cannot be held solidarily liable with Inland
because:
❏ He just signed said instruments in his official capacity as its
President;
❏ Inland has a juridical personality distinct and separate from its
officers and stockholders
❏ The principle of piercing the fiction of corporate entity should be
applied with great caution and not precipitately, because a dual
personality by a corporation and its stockholders would defeat
the principal purpose for which a corporation is formed.
❏ There is no allegation in the complaint questioning the separate
identity and existence of Inland
can validly pierce the fiction of corporate identity of Inland Industries, Inc.
ere is no allegation in the complaint nor a prayer regarding the same? –
ion is bereft of merit. The issues are basically factual and a careful
of the decisions of both lower courts reveals that their findings and
conclusions on the matter of piercing the veil of corporate fiction an
liability of Jacinto are overwhelmingly supported by the evidence.
● In Jacinto’s stipulation of facts, he claimed to be both Pres
General Manager of Inland Industries. However, in his direct t
he claimed that one Bienvenida Catabas was the President
Aurora Heresa was Chairman of the Board.
● The disparity places extreme doubt as to his credibility. Ther
clear-cut delimitation between the personality of Jacinto as an
and the personality of Inland Industries as a corporation.
● Jurisprudence provides that the veil of corporate fiction may b
when it is made as a shield to perpetuate fraud and or confuse
issues.
● As dictum in the case of CIR v. Norton & Harrison Co.,
corporation is merely an adjunct, business conduit or alter ego,
of separate and distinct corporate entity should be disregarded.
On the assertion of lack of evidence:
● It was just an empty assertion because it was found that all t
covered by the 3 Letters of Credit and paid for under the
Exchange were delivered to and received by Inland Indus
through Roberto A. Jacinto, its President and General Mana
signed for and in behalf of defendant Inland and agreed to the t
conditions of 3 separate trust receipts covering the same.
● While on the face of the complaint there is no specific allegatio
corporation is a mere alter ego of petitioner, subsequent deve
from the stipulation of facts up to the presentation of evidence
examination of witnesses, unequivocally show that Metrobank
prove that Jacinto and Inland are one or that he is the corpor
serious objection was heard from petitioner.
● Section 5 of Rule 10 of the Rules of Court provides:
● SEC. 5. Amendment to conform to or authorize presentation of
— When issues not raised by the pleadings are tried by ex
implied consent of the parties, they shall be treated in all r
as if they had been raised in the pleadings. Such amendm
pleadings as may be necessary to cause them to confor
evidence and to raise these issues may be made upon motio
party at any time, even after judgment; but failure so to amend
affect the trial of these issues. If the evidence is objected to at th
trial on the ground that it is not within the issues made by the p
the court may allow the pleadings to be amended and shall do
when the presentation of the merits of the action will be s
thereby and the objecting party fails to satisfy the court
admission of such evidence would prejudice him in maintaining
or defense upon the merits. The court may grant continuance
the objecting party to meet such evidence.
Dispositive:
CORP 2-D Di
ORE, for lack of merit, the Petition is DISMISSED with costs against

CORP 2-D Di