General Credit Corp v. Alsons Dev.

and Investment Corp FACTS: Petitioner General Credit Corporation (GCC), then known as Commercial Credit Corporation (CCC), established CCC franchise companies in different urban centers of the country. In furtherance of its business, GCC was able to secure license from Central Bank (CB) and S C to en!a!e also in "uasi#bankin! acti$ities. %n the other hand, respondent CCC "uity Corporation ( &'I()) was or!ani*ed in by GCC for the purpose of, amon! other thin!s, takin! o$er the operations and mana!ement of the $arious franchise companies. +t a time material hereto, respondent +lsons ,e$elopment and In$estment Corporation (+-S%.S) and the +lcantara family, each owned, /ust like GCC, shares in the aforesaid GCC franchise companies, e.!., CCC ,a$ao and CCC Cebu. +-S%.S and the +lcantara family, for a consideration of P01, sold their shareholdin!s (232,456 shares), in the CCC franchise companies to &'I(). &'I() issued +-S%.S et al., a 7bearer7 promissory note for P01 with a one#year maturity date. 8 years later, the +lcantara family assi!ned its ri!hts and interests o$er the bearer note to +-S%.S which became the holder thereof. But e$en before the e9ecution of the assi!nment deal aforestated, letters of demand for interest payment were already sent to &'I(). &'I() no lon!er then ha$in! assets or property to settle its obli!ation nor bein! e9tended financial support by GCC, pleaded inability to pay. +-S%.S, ha$in! failed to collect on the bearer note aforementioned, filed a complaint for a sum of money: a!ainst &'I() and GCC. GCC is bein! impleaded as party#defendant for any /ud!ment +-S%.S mi!ht secure a!ainst &'I() and, under the doctrine of piercin! the $eil of corporate fiction, a!ainst GCC, &'I() ha$in! been or!ani*ed as a tool and mere conduit of GCC. +ccordin! to &'I() (cross#claim a!ainst GCC); it acted merely as intermediary or brid!e for loan transactions and other dealin!s of GCC to its franchises and the in$estin! public< and is solely dependent upon GCC for its fundin! re"uirements. =ence, GCC is solely and directly liable to +-S%.S, the former ha$in! failed to pro$ide > &'I() the necessary funds to meet its obli!ations to +-S%.S. GCC filed its +.S? @ to Cross#claim, stressin! that it is a distinct and separate entity from &'I(). @(C, findin! that &'I() was but an instrumentality or ad/unct of GCC and considerin! the le!al conse"uences and implications of such relationship, rendered /ud!ment for +lson. C+ affirmed. ISSUE: ?%. the doctrine of 7Piercin! the Aeil of Corporate Biction7 should be applied in the case at bar. HELD: ) S. (he notion of separate personality, howe$er, may be disre!arded under the doctrine C 7piercin! the $eil of corporate fiction7 C as in fact the court will often look at the corporation as a mere collection of indi$iduals or an a!!re!ation of persons undertakin! business as a !roup, disre!ardin! the separate /uridical personality of the corporation unifyin! the !roup. +nother formulation of this doctrine is that when two (0) business enterprises are owned, conducted and controlled by the same parties, both law and e"uity will, when necessary to protect the ri!hts of third parties, disre!ard the le!al fiction that two corporations are distinct entities and treat them as identical or one and the same. +uthorities are a!reed on at least three (6) basic areas where piercin! the $eil, with which the law co$ers and isolates the corporation from any other le!al entity to which it may be related, is allowed. (hese are; 2) defeat of public con$enience, as when the corporate fiction is used as $ehicle for the e$asion of an e9istin! obli!ation< 0) fraud cases or when the corporate entity is used to /ustify a wron!, protect fraud, or defend a crime< or 6) alter e!o cases, where a corporation is merely a farce since it is a mere alter e!o or business conduit of a person, or where the corporation is so or!ani*ed and controlled and its affairs are so conducted as to make it merely an instrumentality, a!ency, conduit or ad/unct of another corporation.

(he Court a!rees with the disposition of the C+ on the application of the piercin! doctrine to the transaction sub/ect of this case. Per the CourtDs count, the trial court enumerated no less than 03 documented circumstances and transactions, which, taken as a packa!e, indeed stron!ly supported the conclusion that respondent &'I() was but an ad/unct, an instrumentality or business conduit of petitioner GCC. (his relation, in turn, pro$ides a /ustifyin! !round to pierce petitionerDs corporate e9istence as to +-S%.SD claim in "uestion. Boremost of what the trial court referred to as 7certain circumstances7 are the commonality of directors, officers and stockholders and e$en sharin! of office between petitioner GCC and respondent &'I()< certain financin! and mana!ement arran!ements between the two, allowin! the petitioner to handle the funds of the latter< the $irtual domination if not control wielded by the petitioner o$er the finances, business policies and practices of respondent &'I()< and the establishment of respondent &'I() by the petitioner to circum$ent CB rules. Aerily, indeed, as the relationships bindin! herein Erespondent &'I() and petitioner GCCF ha$e been that of 7parent#subsidiary corporations7 the fore!oin! principles and doctrines find suitable applicability in the case at bar< and, it ha$in! been satisfactorily and indubitably shown that the said relationships had been used to perform certain functions not characteri*ed with le!itimacy, this Court > feels amply /ustified to 7pierce the $eil of corporate entity7 and disre!ard the separate e9istence of the parent and subsidiary the latter ha$in! been so controlled by the parent that its separate identity is hardly discernible thus becomin! a mere instrumentality or alter e!o of the former.