1.

ALTER EGO The Court held the validity of the contract and “although the plaintiff was the president of the
local corporation, the testimony is conclusive that both of them were what is known as a one
The oft-repeated statement of the courts in the application of the piercing doctrine is that the man corporation, and Willits, as the owner of all the stocks, was the force and dominant
question of whether a corporation is a mere alter ego is purely one of fact, and therefore it is power which controlled them.
not sufficient to allege that a corporate entity is being used merely as an instrumentality of
another person or entity, but that the facts and circumstances be clearly shown to Where the stock of a corporation is owned by one person whereby the corporation
demonstrate such situation. The “probative factors” enumerated in Concept Builders present functions only for the benefit of such individual owner, the corporation and the individual
the critical areas where the underlying circumstances have to be demonstrated should be deemed to be the same.

- A second self/other self The Court found that there was no fraud or collusion between plaintiff and Willits, and it is very
- NO MIND, NO WILL OF ITS OWN; in such that there is a total domination X if it has apparent that the contract letter was to the mutual interests of both parties.
its OWN MIND AND
It is elementary law that a contract that is binding to the corporation is equally binding to the
SEPARATE WILL→ not an alter ego creditor’s committee.

LA CAMPANA V KAISAHAN
VILLA REY CASE is a FRAUD CASE (not an alter ego case)
***as a separate juridical personality-should be treated different, the two factories are operating
Difference of FRAUD and ALTER EGO FRAUD: under one management. In the present case, Tan Tong appears to be the owner of the
gaugau factory.
- Proved: Bad faith( show: badges of fraud)
- Corp is used to defraud And the coffee factory, though an incorporated business, is in reality owned exclusively by Tan
- Must show that one's intent to defraud Tong and his family. As found by the CIR, the two factories have but one office, one
management and one payroll, except after July 17, the day the case was certified to the CIR,
- One act is sufficient
when they began preparing separate payrolls for the two. And above all, it should not be
- BADGE OF FRAUD linking INTENT overlooked that, as also found by the CIR, the laborers of the gaugau factory and the coffee
- Not necessary that there is control ALTER EGO: factory were interchangeable, that is, the laborers from the gaugau factory mere sometimes
- The (series of) acts (of total domination) showing NO MIND NO WILL OF ITS transferred to the coffee factory and vice- versa. In view of all these, the attempt to make the
OWN two factories appear as two separate businesses, when in reality they are but one, is but a
- Corporation is used as a second self/other self device to defeat the ends of the law (the Act governing capital and labor relations) and should
- Only other self, not necessary to prove intention to defraud not be permitted to prevail
- Necessary to identify the acts that will constitute NO MIND NO WILL OF ITS OWN
- Series of acts must have something to do with the factual issue (shows disregard LIDELL CO V CIR
to juridical personality);material to the fact.
Tax evasion: pierce(fraud)--
ARNOLD V WILLTS AND PATERSON he Court held that Lidell Motors, Inc. is an alter ego of Lidell & Co. hence making it liable for
***series of acts tax deficiency based on the principle that to allow a taxpayer to deny tax liability on the ground
Arnold is still an employee, will its signed the contract that the sales were made through another and distinct corporation when it is proved that the
latter is virtually owned by the former or that they are practically one and the same is to
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sanction a circumvention of our tax laws which is consistent with the view of the US Supreme
Court stating in one case that "a taxpayer may gain advantage of doing business thru a
corporation if he pleases, but the revenue officers in proper cases, may disregard the separate
corporate entity where it serves but as a shield for tax evasion and treat the person who
actually may take the benefits of the transactions as the person accordingly taxable."
Moreover, as of the time of organization of Lidell Motors, 98% of the capital stock belonged to
Frank Lidell. The 20% paid-up subscription with which the company began its business was
paid by him. The subsequent subscriptions to the capital stock were made by him and paid
with his own money.
Thus, where a corporation is a dummy and serves no business purpose and is intended only
as a blind, the corporate form may be ignored. Liddell Motors, Inc. was the medium created
by Liddell & Co. to reduce the price and the tax liability. Since Lidell Motors inc. was created
to evade sales taxes it was considered as an alter ego of Lidell & Co
YUTIVO SONS V CTA
Tax avoidance; pierce(based on alter ego)--
--if you dont respect jurid person; why would the state respect juridical personality
The fact that SM is a mere department or adjunct of Yutivo is made more patent by the fact
that arrastre conveying, and charges paid for the "operation of receiving, loading or unloading"
of imported cars and trucks on piers and wharves, were charged against SM by Yutivo.
It plainly appears that Yutivo had sole authority to allocate its expenses even as against SM.
Proceeding to another aspect of the relation of the parties, the management fees due from SM
to Yutivo were taken up as expenses of SM and credited to the account of Yutivo.
Briefly stated, 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.
RAMIREZ TELEPHONE V BANK OF AMERICA
Corporate personality may be disregarded where the defendant stockholder holds 75% of the
stock corporation together with his wife.
While respect for the corporate personality as such is the general rule, the veil of corporate
fiction may be pierced and the funds of the corporation may be garnished to satisfy debts of a
principal stockholder, to administer the ends of justice.
Despite the fact that Ramirez himself was the tenant of Herbosa’s property, the company in
truth occupied the premises, Ramirez paid the rents with the check of the telephone company
GUATSON V NLRC
The three companies are owned by one family, such that majority of the officers of the
companies are the same. The companies are located in one building and use the same
messengerial service. Moreover, there was no showing that private respondent was paid
separation pay when he was absorbed by Philac upon closure of Merex; nor was there
evidence that he resigned from Philac when he transferred to Guatson Travel. Under the
doctrine of piercing the veil of corporate fiction, when valid ground exists, the legal fiction that a
corporation is an entity with a juridical personality separate and distinct from its members or
stockholders may be disregarded. (Guatson is Alter Ego of Merex and Philac)
CONCEPT BUILDERS (DO NOT USE THIS TEST; in cases of ALTER EGO)
***test in determining the applicability of the piercing
1. Control and complete domination
2. Used to commit fraud
3. Caused injury
- The test is for both FRAUD AND ALTER EGO
2. EQUITY
- Cases are usually labor issues
- Cases that fraud and alter ego are not the issue
Equity cases applying the piercing doctrine are what are termed the “dumping ground,”
where no fraud or alter ego circumstances can be culled by the Court to warrant piercing.
The main feature of equity cases is the need to render justice in the situation at hand or to
brush aside merely technical defenses. Often, equity cases of piercing appear in combination
with other types of piercing, especially the defeat of public convenience cases.
In Telephone Engineering and Service Co., Inc. v. Workmen’s Compensation Commission,
the veil of corporate fiction was not allowed to be availed of, and piercing was allowed when
the corporate fiction was made as a scheme to confuse the legitimate issues, such when the
defense of separate juridical personality in interposed for the first time on appeal.
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In A.D. Santos v. Vasquez, a suit for workmen’s compensation was filed by taxi driver
Vasquez against AD Santos, Inc.
Vasquez testified that Amador Santos was his employer. AS Santos, Inc. contended that
Amador is the one liable. The Court held that AD Santos, Inc. is liable. Indeed, Amador was at
one time, the sole owner and operator of the taxi business that employed Vasquez, which was
later transferred to AD Santos, Inc. But such testimony should not be allowed to confuse the
facts relating to employer-employee relationship, for when the veil of corporate fiction is used
to “confuse legitimate issues,” the same should be pierced.
3. DUE PROCESS
The established doctrine in Philippine jurisprudence is that a person not impleaded in the case
cannot be bound by the decision rendered therein, since no individual or entity shall be
affected by a proceeding to which he is a stranger, to do otherwise would be a denial of due
process.
Often the piercing doctrine is sought to be applied against the controlling stockholders or
officers after a judgment debt against the corporation could not be enforced because the
corporation is found to be without sufficient assets. It has been rightly argued in several cases,
that to enforce a writ of execution to satisfy a judgment rendered against the corporation on
the separate assets of the stockholders or officers would be in violation of due
process clause in cases where such stockholders or officers were not even summoned as
parties to the case brought against the corporation.
MCCONELL V CA
New officers were charged: due to the fact that they benefited from it CA found that there is no
question that a wrong has been committed by the so-called Park Rite Co., Inc., upon the
plaintiffs when it occupied the lot of the latter without its prior knowledge and consent and
without paying the reasonable rentals for the occupation of said lot.
There is also no that the corporation was a mere alter ego or business conduit of the
defendants Cirilo Paredes and Ursula Tolentino, and before them — the defendants M.
McConnel, W. P. Cochrane, and Ricardo Rodriguez. The evidence clearly shows that these
persons completely dominated and controlled the corporation and that the functions of the
corporation were solely for their benefits.
That the corporation was a mere extension of their personality is shown by the fact that the
office of Cirilo Paredes and that of Park Rite Co., Inc. were located in the same building, in
the same floor and in the same room — at 507 Wilson Building.
This is further shown by the fact that the funds of the corporation were kept by Cirilo Paredes
in his own name. The corporation itself had no visible assets, as correctly found by the trial
court, except perhaps the toll house, the wire fence around the lot and the signs thereon. It
was for this reason that the judgment against it could not be fully satisfied.
CANO V CIR
- Filed a case against officers; but the corp was not impleded
While it is an undisputed rule that a corporation has a personality separate and distinct from its
members or stockholders because of a fiction of the law, here we should not lose sight of the
fact that the Emilio Cano Enterprises, Inc. is a closed family corporation where the
incorporators and directors belong to one single family. Here is an instance where the
corporation and its members can be considered as one. And to hold such entity liable for the
acts of its members is not to ignore the legal fiction but merely to give meaning to the principle
that such fiction cannot be invoked if its purpose is to use it as a shield to further an end
subversive of justice.
And so it has been held that while a corporation is a legal entity existing separate and apart
from the persons composing it, that concept cannot be extended to a point beyond its reason
and policy, and when invoked in support of an end subversive of this policy it should be
disregarded by the courts
NAMARCO v ASSTD FINANCE
The Court feels perfectly justified in “piercing the veil of corporate fiction” and in holding Sycip
personally liable, jointly and severally with his co-defendant. It is settled law in this and other
jurisdictions that when the corporation is the mere alter ego of a person, the corporate fiction
may be disregarded; the same being true when the corporation is controlled, and its affairs are
so conducted as to make it merely an instrumentality, agency or conduit of another
JACINTO V CA
And we are thus persuaded to agree with the findings of the lower court that the latter
(Roberto Jacinto) was practically the corporation itself. Indeed, a painstaking examination of
the records show that there is no clear-cut delimitation between the personality of Roberto
Jacinto as an individual and the personality of Inland Industries, Inc. as a corporation. The
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circumstance aforestated lead us to conclude that the corporate veil that enshrouds defendant
Inland Industries, Inc. could be validly pierced, and a host of cases decided by our High Court
is supportive of this view. Thus it held that when the veil of corporate fiction is made as a
shield to perpetrate fraud and/or confuse legitimate issues, the same should be pierced.
Where a corporation is merely an adjunct, business conduit or alter ego, the fiction of separate
and distinct corporate entity should be disregarded
ARCILLA V CA
***the liability for back wages rests in the Pres for being in charge of the corp.
An entity which was not made a party in the main case and which did not seek to intervene
has no personality to seek a review of the public respondent’s amended decision. Defenses
and objections other than the failure to state a cause of action and lack of jurisdiction not
pleaded either in a motion to dismiss or in the answer are deemed waived.
Furthermore, even if the obligation was incurred in the name of the corporation, the petitioner
would still be personally liable therefore because for all legal intents and purposes, he and the
corporation are one and the same.
The contention that the defendant had ceased to be the president is unavailing to free himself
from his responsibility because in resolving his Motion for Clarificatorty Judgment, the court had
already pierced the veil of corporate fiction and disregarded the separate personalities
AC RANSOM V NLRC
Rosario Company is held liable because the organization of a "run-away corporation,"
ROSARIO, in 1969 at the time the unfair labor practice case was pending before the CIR
(Difference from PABALAN CASE) by the same persons who were the officers and
stockholders of RANSOM, engaged in the same line of business as RANSOM, producing the
same line of products, occupying the same compound, using the same machineries, buildings,
laboratory, bodega and sales and accounts departments used by RANSOM, and which is still
in existence. Both corporations were closed corporations owned and managed by members of
the same family. Its organization proved to be a convenient instrument to avoid payment of
Back wages and the reinstatement of the 22 workers. This is another instance where the
fiction of separate and distinct corporate entities should be disregarded.
It 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 financial obligation to its employees.... When a notion of legal
entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law
will regard the corporation as an association or persons, or, in the case of two corporations, will
merge them into one.
DE GUZMAN V NLRC
In the case at bar, the petitioner, while admittedly the highest ranking local representative of
AMAL in the Philippines, is nevertheless not a stockholder and much less a member of the
board of directors or an officer thereof. He is at most only a managerial employee under Art.
212 (m) of the Labor Code. Therefore, he must not be held solidarily liable with the AMAL.
HOWEVER, the manner and the means by which he satisfied his claims against AMAL are
evidently characterized by BAD FAITH. For one, Respondent A. de Guzman took advantage
of his position as General Manager and arrogated to himself the right to retain possession and
ownership of all properties owned and left by AMAL in the Philippines, even if he knew that
Complainants herein have similar valid claims for unpaid wages and other employee benefits
from the Respondent AMAL.
Another strong indication of bad faith on the part of Respondent A. de Guzman is his filing of a
separate complaint against AMAL before the NLRC The idea of the trust was conceived by
Samuel Dodd, an attorney for Standard Oil. In the case of this company, a board of trustees was
set up and it was given control of all of the Standard Oil properties. Every stockholder received
20 trust certificates for each share of Standard Oil stock. All profits from the component
companies were sent to the nine trustees, who set the dividends. The nine trustees also selected
the directors and officers of all the component companies. This allowed Standard Oil to function
as a monopoly.
Trusts used a number of techniques to eliminate competitors, including
(1) buying them out,
(2) temporarily undercutting their prices,
(3) forcing customers to sign long-term contracts
(4) forcing customers to buy unwanted products in order to receive the products they wanted
and
(5) dispatching thugs to use intimidation and violence when all other means of persuasion
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failed. -based on the primary purpose stated on the articles of incorporation
*primary purpose as stated in the articles are expressed
Arbitration Branch about four (4) months after the filing of the instant case without informing power:implied from the primary purpose
this Office about the existence of said case during the proceedings in the instant case. -necessary and essential to carry out the primary purpose of the corporation
● 1 primary purpose (if no primary purpose, the corp has no implied power: from
primary purpose there comes the implied power)
4. ANTI TRUST ISSUES
- A trust was an arrangement by which stockholders in several companies
transferred their shares to a single set of trustees. In exchange, the stockholders
received a certificate entitling them to a specified share of the consolidated Example of implied power:
earnings of the jointly managed companies. The trusts came to dominate a number Jollibee Corp : manufacture, distribution and sale of fast food products
of major industries, and were, in effect, monopolies. (primary purpose)
: purchase corp. That repairs motorcycles (implied)
- A monopoly is a situation in which there is a single supplier or seller of a good or : manufacture food containers (implied)
service for which there are no close substitutes. Economists and others have long -***anything that will promote the primary the corp can do
known that unregulated monopolies tend to damage the economy by (1) charging
higher prices, (2) providing inferior goods and services and (3) suppressing -incidental powers
innovation, as compared with a competitive situation (i.e., the existence of
numerous, competing suppliers of the good or service). MADRIGAL V ZAMORA
The shares of stock of the corp may be used to transfer in favor of the employees
**retrenchment:losses must be SUBSTANTIAL, IMMINENT,
- The most infamous of the trusts was the Standard Oil Trust, which was formed in NECESSARY(proof of financial statement)
January, 1882. At that time, Standard Oil and its affiliates controlled more than 90
percent of the oil refining capacity and most of the oil marketing facilities in the U.S. Ex: CS 10M loss 1m : ratio
Trusts were also established in numerous other industries, some of the largest of 10%
which were sugar, tobacco, railroads, steel and meatpacking. 5M 1m : 20%
4M 1m :25%
CORPORATE POWERS
2M 1m :50%
-expressed powers (what are the express powers) ***if capital stock was only decreased retrenchment is not valid;losses remain the same:
-based on law (articles, by laws, corpo code, revised securities code,tax code) making the ratio for losses appear to be greater
-provided by the corporation code
-given to corps: may acquire or sell properties, incur obligations---relating to the by laws
-stated in the Articles of Incorporation

-implied powers
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 - exists because a corp is a person with basic inherent power Sec. 2
Corp Code.
- incidental to its existence/ inherent to its existence
*** if expressed power: to sue and be sued even if not stated: it may still be done
because it will fall under incidental powers

Example of incidental power:

- power to sue/ be sued

***anything that does not fall under any of the 3 powers cited; the corporation cannot
do/act
***if the act is outside the corporate powers it is ULTRA VIRES

BS SAVINGS V SIA
Whether the lawyer can sign cert of non forum shopping on behalf of the corp?
***Corp is a juridical peron, and it cannot signn it, and only through its agent: the reso
authorizing makes the lawyers as aurth agents of the corp

Corporate Term: 50 years---so long it has consent corp may shorten it

***Manila Railroad Doctrine: the art of incorp is a contract bet the stock holders,
the corp and the state
***term is found under the articles: anytime you touch the contract you get the
consent of of the three
***lengthening the term: you need to get the consent of three parties
***why shortening does not need the consent of the three
parties?because shorter period that 50 has already envisioned in its contract
***while lengthening: was not envisioned under the contract: it affects the rights