1 Reynoso vs CA

FACTS:Reynoso was the branch manager of Commercial Credit Corporation

Quezon City (CCC-QC), a branch of Commercial Credit Corporation (CCC). It was
alleged that Reynoso was opposed to certain questionable commercial practices
being facilitated by CCC which caused its branches, like CCC-QC, to rack up debts.
Eventually, Reynoso withdrew his own funds from CCC-QC. This prompted CCC-QC
to file criminal cases for estafa and qualified theft against Reynoso. The criminal
cases were dismissed and Reynoso was exonerated and at the same time CCC-QC
was ordered to pay Reynosos counterclaims which amounted to millions. A writ of
execution was issued against CCC-QC. The writ was opposed by CCC-QC as it now
claims that it has already closed and that its assets were taken over by the mother
company, CCC.
Meanwhile, CCC changed its name to General Credit Corporation (GCC).
Reynoso then filed a petition for an alias writ of execution. GCC opposed the writ as
it argued that it is a separate and distinct corporation from CCC and CCC-QC, in
short, it raises the defense of corporate fiction.
ISSUE: Whether or not GCC is correct.
HELD:
A corporation is an artificial being created by operation of law, having the right of
succession and the powers, attributes, and properties expressly authorized by law
or incident to its existence. It is an artificial being invested by law with a personality
separate and distinct from those of the persons composing it as well as from that of
any other legal entity to which it may be related. It was evolved to make possible
the aggregation and assembling of huge amounts of capital upon which big
business depends.
In this case, the veil of corporate fiction must be pierced. It is obvious that CCCs
change of name to GCC was made in order to avoid liability. CCC-QC willingly closed
down and transferred its assets to CCC and thereafter changed its name to GCC in
order to avoid its responsibilities from its creditors. GCC and CCC are one and the
same; they are engaged in the same line of business and single transaction process,
i.e. finance and investment. When the mother corporation and its subsidiary cease
to act in good faith and honest business judgment, when the corporate device is
used by the parent to avoid its liability for legitimate obligations of the subsidiary,
and when the corporate fiction is used to perpetrate fraud or promote injustice, the
law steps in to remedy the problem. When that happens, the corporate character is
not necessarily abrogated. It continues for legitimate objectives. However, it is
pierced in order to remedy injustice, such as that inflicted in this case.