CORPORATION

 LAW  CASE  DIGESTS  

3C  &  3S  –  ATTY.  CARLO  BUSMENTE  

GOOD  EARTH  EMPORIUM  vs.  CA   Article  1240  CC  provides  that:  "Payment  shall  be  made  to  the  person  in  whose  
  favor   the   obligation   has   been   constituted,   or   his   successor   in   interest,   or   any  
FACTS:   person  authorized  to  receive  it."    
A   lease   contract   was   entered   between   Roces   Realty,   Inc.   (lessor)   and   Good    
Earth  Emporium,  Inc.  (GEE)  (lessee)  for  a  term  of  3  years  at  a  monthly  rate  of   In   the   case   at   bar,   the   supposed   payments   were   not   made   to   Roces-­‐Reyes  
P65,000.00   for   a   5-­‐storey   building   located   at   Sta.   Cruz,   Manila.         GEE   had   Realty,   Inc.   or   to   its   successor   in   interest   nor   is   there   positive   evidence   that   the  
defaulted  in  its  payments  and  as  a  consequence,  Roces  filed  an  ejectment  case   payment   was   made   to   a   person   authorized   to   receive   it.   No   such   proof   was  
(Unlawful  Detainer)  against  GEE.       submitted  but  merely  inferred  by  the  RTC  from  Marcos  Roces  having  signed  the  
  Lease   Contract   as   President   which   was   witnessed   by   Jesus   Marcos   Roces.   The  
MTC  ordered  GEE  to  vacate  the  premises.    A  motion  for  execution  was  filed  by   latter,   however,   was   no   longer   President   or   even   an   officer   of   Roces-­‐Reyes  
Roces  while  simultaneously,  GEE  filed  a  Notice  of  Appeal.    However,  GEE  filed   Realty,  Inc.  at  the  time  he  received  the  money  and  signed  the  sale  with  pacto  de  
motion   to   withdraw   the   appeal.     Upon   ex-­‐parte   motion   by   Roces,   the   trial   court   retro.  He,  in  fact,  denied  being  in  possession  of  authority  to  receive  payment  for  
issued  an  alias  writ  of  execution.    GEE  then  filed  a  motion  to  quash  the  writ  and   the   respondent   corporation   nor   does   the   receipt   show   that   he   signed   in   the  
notice   of   levy   and   an   a   motion   for   the   issuance   of   a   restraining   order.     The   same  capacity  as  he  did  in  the  Lease  Contract  at  a  time  when  he  was  President  
lower   court   issued   a   restraining   order   to   the   sheriff   to   hold   the   execution   for  respondent  corporation.  
pending   hearing   in   the   motion   to   quash.     While   the   motion   was   pending,   GEE    
filed   a   petition   for   relief   from   judgment   before   another   court   but   was   A   corporation   has   a   personality   distinct   and   separate   from   its   individual  
dismissed.   MTC   denied   the   Motion   to   quash.   CA   denied   appeal   and   remanded   stockholders  or  members.  Being  an  officer  or  stockholder  of  a  corporation  does  
the  case  to  the  RTC.   not   make   one's   property   also   of   the   corporation,   and   vice-­‐versa,   for   they   are  
  separate   entities.   Shareowners   are   in   no   legal   sense   the   owners   of   corporate  
RTC   found   the   amount   of   P1M   evidenced   by   Exhibit   "1"   and   another   P1M   property   (or   credits)   which   is   owned   by   the   corporation   as   a   distinct   legal  
evidenced   by   pacto   de   retro   sale   instrument   (Exhibit   "2")   were   in   full   person.   As   a   consequence   of   the   separate   juridical   personality   of   a   corporation,  
satisfaction  of  the  judgment  obligation.  CA  reversed.   the  corporate  debt  or  credit  is  not  the  debt  or  credit  of  the  stockholder,  nor  is  
  the  stockholder's  debt  or  credit  that  of  the  corporation.  
ISSUE:    
WON   there   was   full   satisfaction   of   the   judgment   debt   in   favor   of   Roces   which   CRUZ  vs.  DALISAY  
would  justify  the  quashing  of  the  writ  of  execution.    
  DOCTRINE:   A   corporation   has   a   personality   distinct   and   separate   from   its  
HELD:   individual  stockholders  or  members.  
The   exhibits   show   that   nowhere   in   any   of   said   exhibits   was   there   any   writing    
referring   to   any   settlement   between   the   parties   of   petitioners'   judgment   FACTS:  
obligation.   Moreover,   there   is   no   indication   in   the   receipt,   Exhibit   "1",   that   it   In   a   sworn   complaint   dated   July   23,   1984,   Adelio   Cruz   (complainant)   charged  
was   in   payment,   full   or   partial,   of   the   judgment   obligation.   Likewise,   there   is   no   Quiterio   Dalisay   (respondent),   Senior   Deputy   Sheriff   of   Manila,   with  
indication  in  the  pacto  de  retro  sale  which  was  drawn  in  favor  of  Jesus  Marcos   malfeasance   in   office,   corrupt   practices   and   serious   irregularities   allegedly  
Roces   and   Marcos   V.   Roces   and   not   the   respondent   corporation,   that   the   committed   as   follows:   (a)   Respondent   attached   and/or   levied   the   money  
obligation   embodied   therein   had   something   to   do   with   petitioners'   judgment   belonging  to  complainant  Cruz  when  he  was  not  himself  the  judgment  debtor  in  
obligation  with  respondent  corporation.   the   final   judgment   of   an   NLRC   case   sought   to   be   enforced   but   rather   the  
  company   known   as   “Qualitrans   Limousine   Service,   Inc.”.   (b)   Respondent   also  
caused   the   service   of   the   alias   writ   of   execution   upon   complainant   who   is   a  
resident   of   Pasay   City,   despite   knowledge   that   his   territorial   jurisdiction   covers  

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 CORPORATION  LAW  CASE  DIGESTS  
3C  &  3S  –  ATTY.  CARLO  BUSMENTE  

Manila   only   and   does   not   extend   to   Pasay   City.   The   respondent’s   contention   BANK  OF  AMERICA  vs.  CA  
was  that  when  he  garnished  complainant’s  cash  deposit  at  the  Philtrust  bank  he    
was   merely   performing   a   ministerial   duty.   And   that   while   it   is   true   that   said   FACTS:  
writ   was   addressed   to   Qualitrans   Limousine   Service,   Inc.,   it   is   also   a   fact   that   The   Litonjuas   were   engaged   in   the   shipping   business   and   owned   two   vessels,  
complainant   had   executed   an   affidavit   before   the   Pasay   City   assistant   fiscal   through   their   wholly-­‐owned   corporations.   With   their   business   doing   well,   the  
stating   that   he   is   the   owner/   president   of   Qualitrans.   Because   of   that   petitioner   banks   induced   them   to   increase   the   number   of   their   ships   in  
declaration,  the  counsel  for  the  plaintiff  in  the  labor  case  advised  him  to  serve   operation,   offering   them   easy   loans   to   acquire   said   vessels.   Thereafter,  
notice  of  garnishment  on  the  Philtrust  bank.  On  November  12,  1984,  this  case   petitioners   acquired,   through   Litonjuas'   corporations   as   borrowers,   four  
was   referred   to   the   Executive   Judge   of   the   Regional   Trial   Court   of   Manila   for   additional   vessels   which   were   registered   in   the   names   of   their   corporations.  
investigation,   report   and   recommendation.   Prior   to   the   termination   of   the   The  Litonjuas  claimed,  among  others,  that  petitioners  as  trustees  did  not  fully  
proceedings,   however,   complainant   executed   an   affidavit   of   desistance   stating   render  an  account  of  all  the  income  derived  from  the  operation  of  the  vessels  as  
that   he   is   no   longer   interested   in   prosecuting   the   case   against   respondent   well   as   the   proceeds   of   the   subsequent   foreclosure   sale   and   that   the   loans  
Dalisay   and   that   it   was   just   a   "misunderstanding"   between   them.   Upon   acquired  for  the  purchase  of  the  four  additional  vessels  matured  and  remained  
respondent's  motion,  the  Executive  Judge  issued  an  order  dated  May  29,  1986   unpaid,   prompting   petitioners   to   have   all   the   six   vessels,   including   the   two  
recommending  the  dismissal  of  the  case.   vessels   originally   owned   by   the   private   respondents,   foreclosed   and   sold   at  
  public   auction.   Petitioners   filed   a   motion   to   dismiss   on   grounds   of   forum   non  
ISSUE:   conveniens  and  lack  of  cause  of  action  against.  
WON  the  action  of  Dalisay  was  correct    
  ISSUE:    
HELD:   WON   plaintiffs   have   no   cause   of   action   against   defendants   since   plaintiffs   are  
NO.   The   Respondent’s   actuation   in   enforcing   a   judgment   against   complainant   merely  stockholders  of  the  corporations  which  are  the  registered  owners  of  the  
who   is   not   a   judgment   debtor   in   the   case   calls   for   disciplinary   action.   What   is   vessels  and  the  borrowers  of  petitioners.  
incumbent   upon   respondent   is   to   ensure   that   only   the   portion   of   a   decision    
ordained   or   decreed   in   the   dispositive   part   should   be   the   subject   of   the   HELD:    
execution.  The  tenor  of  the  NLRC  judgment  and  the  implementing  writ  is  clear   No.  Petitioners'  argument  that  private  respondents,  being  mere  stockholders  of  
enough.   It   directed   Qualitrans   Limousine   Service,   inc.,   to   reinstate   the   the   foreign   corporations,   have   no   personalities   to   sue,   and   therefore,   the  
discharged   employees   and   pay   them   full   backwages.   Respondent,   however,   complaint   should   be   dismissed,   is   untenable.   A   case   is   dismissible   for   lack   of  
choose  to  “pierce  the  veil  of  corporate  entity”  usurping  a  power  belonging   personality  to  sue  upon  proof  that  the  plaintiff  is  not  the  real  party-­‐in-­‐interest.  
to  the  court  and  assumed  improvidently  that  since  the  complainant  is  the   Lack   of   personality   to   sue   can   be   used   as   a   ground   for   a   Motion   to   Dismiss  
owner/president   of   Qualitrans   Limousine   Service,   Inc.,   they   are   one   and   based   on   the   fact   that   the   complaint,   on   the   face   thereof,   evidently   states   no  
the  same.  It  is  a  well  settled  doctrine  both  in  law  and  equity  that  as  a  legal   cause  of  action.    
entity,   a   corporation   has   a   personality   distinct   and   separate   from   its    
individual   stockholders   or   members.   The  mere  fact  that  one  is  president  of   In   the   case   at   bar,   the   complaint   contains   the   three   elements   of   a   cause   of  
the   corporation   does   not   render   the   property   he   owns   or   possesses   the   action.  It  alleges  that:  (1)  plaintiffs,  herein  private  respondents,  have  the  right  
property   of   the   corporation,   since   that   president,   as   an   individual,   and   the   to  demand  for  an  accounting  from  defendants  (herein  petitioners),  as  trustees  
corporation  are  separate  entities.   by   reason   of   the   fiduciary   relationship   that   was   created   between   the   parties  
  involving   the   vessels   in   question;   (2)   petitioners   have   the   obligation,   as  
  trustees,   to   render   such   an   accounting;   and   (3)   petitioners   failed   to   do   the  
  same.  
   

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 CORPORATION  LAW  CASE  DIGESTS  
3C  &  3S  –  ATTY.  CARLO  BUSMENTE  

AVON  DALE  GARMENTS,  INC.  vs.  NLRC   no   effect   on   the   identity   of   the   corporation,   or   in   its   property,   rights,   or  
  liabilities.  Respondents   NLRC   therefore,   did   not   commit   any   grave   abuse   of  
FACTS:   discretion   in   holding   that   petitioner   should   likewise   include   private  
Private   respondents   were   employees   of   petitioner   Avon   Dale   Garments,   Inc.   respondents'  employment  with  Avon  Dale  Shirt  Factory  in  computing  private  
and   its   predecessor-­‐in-­‐interest,   Avon   Dale   Shirt   Factory.   Following   a   dispute   respondents'   separation   pay   as   petitioner   failed   to   substantiate   its   claim   that  
brought   about   by   the   rotation   of   workers,   a   compromise   agreement   was   it  is  a  distinct  entity.  
entered   into   between   petitioner   and   private   respondents   wherein   the   latter    
were   terminated   from   service   and   given   their   corresponding   separation   pay.   CONCEPT BUILDERS vs. NLRC  
However,  upon  refusal  of  the  petitioner  to  include  in  the  computation  of  private  
FACTS:  
respondents'   separation   pay   the   period   during   which   the   latter   were   employed  
Herein  petitioner  is  a  domestic  corporation,  with  principal  office  at  355  Maysan  
by  the  Avon  Dale  Shirt  Factory,  private  respondents  filed  a  complaint  with  the  
Road,   Valenzuela,   Metro   Manila,   is   engaged   in   the   construction   business.  
labor  arbiter  claiming  a  deficiency  in  their  separation  pay  According  to  private  
Private   respondents   were   employed   by   said   company   as   laborers,   carpenters  
respondents,   their   previous   employment   with   petitioner's   predecessor-­‐in-­‐
and  riggers.  
interest,   Avon   Dale   Shirt   Factory,   should   be   credited   in   computing   their  
 
separation  pay  considering  that  Avon  Dale  Shirt  factory  was  not  dissolved  and  
Private  respondents  were  then  served  individual  written  notices  of  termination  
they   were   not   in   turn   hired   as   new   employees   by   Avon   Dale   Garments,   Inc.  The  
of  employment  by  petitioner,  effective  on  November  30,  1981.  It  was  stated  in  
instant   petition   is   now   brought   by   petitioner   Avon   Dale   Garments,   Inc.,  
the  individual  notices  that  their  contracts  of  employment  had  expired  and  the  
anchored  on  the  sole  ground  that,  as  a  separate  and  distinct  entity,  it  should  not  
project  in  which  they  were  hired  had  been  completed.  
be   held   liable   for   private   respondents'   separation   pay   from   Avon   Dale   Shirt  
 
Factory.  
Petitioner   had   to   engage   the   services   of   sub-­‐contractors   whose   workers  
performed   the   functions   of   private   respondents.   Aggrieved,   private  
ISSUE:  
respondents   filed   a   complaint   for   illegal   dismissal,   unfair   labor   practice   and  
WON  petitioner  is  a  separate  and  distinct  entity  from  Avon  Dale  Shirt.  
non-­‐payment  of  their  legal  holiday  pay,  overtime  pay  and  thirteenth-­‐month  pay  
 
against  petitioner.  
HELD:  
 
No.   Petitioner   failed   to   established   that   Avon   Dale   Garments,   Inc.,   is   a  
On   December   19,   1984,   the   LA   rendered   judgment   against   petitioner.   On  
separate   and   distinct   entity   from   Avon   Dale   Shirt   Factory,   absent   any  
appeal,  the  NLRC  dismissed  the  motion  for  reconsideration.  
showing   that   there   was   indeed   an   actual   closure   and   cessation   of   the  
 
operations  of  the  latter.  The  mere  filing  of  the  Articles  of  Dissolution  with  the  
Thereafter,  the  LA  issued  a  writ  of  execution  directing  the  sheriff  to  execute  the  
Securities  and  Exchange  Commission,  without  more,  is  not  enough  to  support  
decision   dated   Dec   19,   1984.   The   writ   was   partially   satisfied   through  
the   conclusion   that   actual   dissolution   of   an   entity   in   fact   took   place.  On   the  
garnishment.   On   February   1,   1989,   an   alias   writ   of   Execution   was   issued   by   the  
contrary,   the   prevailing   circumstances   in   this   case   indicated   that   petitioner  
LA  directing  the  sheriff  to  collect  the  balance  of  the  judgment  award.  
company  is  not  distinct  from  its  predecessor  Avon  Dale  Shirt  Factory,  but  in  
 
fact   merely   continued   the   operations   of   the   latter   under   the   same   owners,  
On   July   13,   1989,   the   sheriff   issued   a   report   stating   that   he   tried   to   serve   the  
the  same  business  venture,  at  same  address,  and  even  continued  to  hire  the  
alias  writ   of   execution   on   petitioner   through   the   security   guard   on   duty   but   the  
same   employees   (herein   private   respondents).   Thus,   conformably   with  
service   was   refused   on   the   ground   that   petitioner   no   longer   occupied   the  
established   jurisprudence,   the   two   entities   cannot   be   deemed   as   separate  
premises.  
and  distinct  where  there  is  a  showing  that  one  is  merely  the  continuation  of  
 
the  other.  In  fact,  even  a  change  in  the  corporate  name  does  not  make  a  new  
corporation,  whether  effected  by  a  special  act  or  under  a  general  law,  it  has  

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 CORPORATION  LAW  CASE  DIGESTS  
3C  &  3S  –  ATTY.  CARLO  BUSMENTE  

A  second  alias  writ  was  issued  by  the  court  but  again  it  had  not  been  enforced   notion   of   separate   juridical   personality   is   used   to   defeat   public   convenience,  
on   the   ground   that   the   employees   inside   petitioner’s   premises   claimed   they   justify  wrong,  protect  fraud  or  defend  crime,  or  is  used  as  a  device  to  defeat  the  
were  employees  of  Hydro  Pipes  Philippines,  Inc.  (HPPI).   labor  laws,  this  separate  personality  of  the  corporation  may  be  disregarded  or  
  the   veil   of   corporate   fiction   pierced.   11   This   is   true   likewise   when   the  
The   said   special   sheriff   recommended   that   a   "break-­‐open   order"   be   issued   to   corporation  is  merely  an  adjunct,  a  business  conduit  or  an  alter  ego  of  another  
enable   him   to   enter   petitioner's   premises   so   that   he   could   proceed   with   the   corporation.  
public  auction  sale  of  the  aforesaid  personal  properties  on  November  7,  1989.    
  The   conditions   under   which   the   juridical   entity   may   be   disregarded   vary  
On   November   6,   1989,   a   certain   Dennis   Cuyegkeng   filed   a   third-­‐party   claim   according  to  the  peculiar  facts  and  circumstances  of  each  case.  No  hard  and  fast  
with  the  Labor  Arbiter  alleging  that  the  properties  sought  to  be  levied  upon  by   rule  can  be  accurately  laid  down,  but  certainly,  there  are  some  probative  factors  
the   sheriff   were   owned   by   Hydro   (Phils.),   Inc.   (HPPI)   of   which   he   is   the   Vice-­‐ of   identity   that   will   justify   the   application   of   the   doctrine   of   piercing   the  
President.   corporate  veil,  to  wit:  
 
Private   respondents   filed   a   "Motion   for   Issuance   of   a   Break-­‐Open   Order,"   1.  Stock  ownership  by  one  or  common  ownership  of  both  corporations.  
alleging   that   HPPI   and   petitioner   corporation   were   owned   by   the   same   2.  Identity  of  directors  and  officers.  
incorporator/stockholders.   They   also   alleged   that   petitioner   temporarily   3.  The  manner  of  keeping  corporate  books  and  records.  
suspended   its   business   operations   in   order   to   evade   its   legal   obligations   to   4.    Methods  of  conducting  the  business.    
them  and  that  private  respondents  were  willing  to  post  an  indemnity  bond  to    
answer  for  any  damages  which  petitioner  and  HPPI  may  suffer  because  of  the   The  test  in  determining  the  applicability  of  the  doctrine  of  piercing  the  veil  of  
issuance  of  the  break-­‐open  order.   corporate  fiction  is  as  follows:  
 
1.   Control,   not   mere   majority   or   complete   stock   control,   but   complete  
HPPI   opposed   the   motion   alleging   that   the   2   corporations   are   engaged   in   2   domination,  not  only  of  finances  but  of  policy  and  business  practice  in  respect  
different   kinds   of   businesses,   i.e.,   HPPI   is   a   manufacturing   firm   while   petitioner   to   the   transaction   attacked   so   that   the   corporate   entity   as   to   this   transaction  
was  then  engaged  in  construction.   had  at  the  time  no  separate  mind,  will  or  existence  of  its  own;  
 
The  LA  denied  the  motion  for  break-­‐open  order  while  NLRC  on  appeal,  set  aside   2.   Such   control   must   have   been   used   by   the   defendant   to   commit   fraud   or  
the  LA’s  order  and  issued  the  said  order.   wrong,  to  perpetuate  the  violation  of  a  statutory  or  other  positive  legal  duty  or  
dishonest  and  unjust  act  in  contravention  of  plaintiff's  legal  rights;  and  
ISSUE:      
WON  the  doctrine  of  piercing  the  corporate  veil  should  not  have  been  applied   3.  The  aforesaid  control  and  breach  of  duty  must  proximately  cause  the  injury  
in  this  case,  in  the  absence  of  any  showing  that  it  created  HPPI  in  order  to  evade   or  unjust  loss  complained  of.  
its  liability  to  private  respondents    
  The   absence   of   any   one   of   these   elements   prevents   "piercing   the   corporate  
HELD:   veil."   In   applying   the   "instrumentality"   or   "alter   ego"   doctrine,   the   courts   are  
We   find   petitioner's   contention   to   be   unmeritorious.   It   is   a   fundamental   concerned   with   reality   and   not   form,   with   how   the   corporation   operated   and  
principle  of  corporation  law  that  a  corporation  is  an  entity  separate  and  distinct   the  individual  defendant's  relationship  to  that  operation.  
from   its   stockholders   and   from   other   corporations   to   which   it   may   be    
connected.  But,  this  separate  and  distinct  personality  of  a  corporation  is  merely    
a   fiction   created   by   law   for   convenience   and   to   promote   justice.   So,   when   the    

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3C  &  3S  –  ATTY.  CARLO  BUSMENTE  

FIRST  PHIL.  INTERNATIONAL  BANK  vs.  CA   purported   sale   involving   the   same   real   property   "as   unenforceable   as   against  
the  Bank",  which  is  the  petitioner  herein.    
FACTS:    
Producer   Banks   of   the   Philippines   (Bank   for   brevity)   acquired   BYME’s   six   In  other  words,  in  the  Second  Case,  the  majority  stockholders,  in  representation  
[foreclosed]   parcels   of   land   in   Sta.   Rosa.   Thereafter,   Demetria   and   Janolo   of  the  Bank,  are  seeking  to  accomplish  what  the  Bank  itself  failed  to  do  in  the  
wanted  to  purchase  said  properties.  After  several  negotiations  between  Rivera   original  case  in  the  trial  court.  In  brief,  the  objective  or  the  relief  being  sought,  
(Bank’s   Manager)   and   Demetria   and   Janolo,   the   purchase   price   was   agreed   at   though  worded  differently,  is  the  same,  namely,  to  enable  the  petitioner  Bank  to  
P5.5  million.  However,  sometime  in  1987,  Encarnacion,  the  new  conservator  of   escape  from  the  obligation  to  sell  the  property  to  respondent.  This  Court  ruled  
the   bank,   wrote   a   letter   to   Demetria   and   Janolo,   and   informed   them   that   the   that  the  filing  by  a  party  of  two  apparently  different  actions,  but  with  the  same  
proposal  to  purchase  the  proprieties   was  still  “under  study.”  (So  hindi  pa  raw   objective,  constituted  forum  shopping  
ibebenta,   ganyan)   Consequently,   Demetria   and   Janolo   sent   demand   letters   to  
the   Bank;   they   claimed   that   the   contract   of   sale   was   already   perfected.   They   Although   the   plaintiffs   in   the   Second   Case   (Henry   L.   Co,   et   al.)   are   not   name  
even   sent   a   check   as   payment.   The   Bank,   conversely,   had   advertised   the   said   parties   in   the   First   Case,   they   represent   the   same   interest   and   entity,   namely,  
properties   for   sale   to   any   buyer.   The   Bank   justified   its   noncompliance   with   petitioner  Bank,  because:    
Demetrio   and   Janolo’s   demands   based   on   Rivera’s   lack   of   authority,   thus  such    
“sale”   was   illegal.   Suits   ensued.   Demetria   and   Janolo   filed   for   specific   Firstly,   they   are   not   suing   in   their   personal   capacities,   for   they   have   no   direct  
performance  with  damages  against  the  Bank.  [First  case]     personal   interest   in   the   matter   in   controversy.   They   are   not   principally   or   even  
  subsidiarily  liable;  much  less  are  they  direct  parties  in  the  assailed  contract  of  
Co,  allegedly  owned  80%  of  Bank’s  shares  of  stocks,  filed  a  motion  to  intervene,   sale;  and    
which  the  trial  court  denied  for  being  filed  late  (case  had  been  concluded).  On    
the   other   hand,   the   Bank,   Rivera,   and   Encarnacion   appealed   the   trial   court’s   Secondly,   the   allegations   of   the   complaint   in   the   Second   Case   show   that   the  
decision,  which  favored  Demetria  and  Janolo.     stockholders   are   bringing   a   "derivative   suit".   In   the   caption   itself,   petitioners  
Persistent,   Co   and   other   stockholders   filed   a   “derivative   suit”   to   declare   the   claim   to   have   brought   suit   "for   and   in   behalf   of   the   Producers   Bank   of   the  
“sale”  void.  [Second  case]  Janolo  answered  that  the  second  case  was  barred  by   Philippines".  Indeed,  this  is  the  very  essence  of  a  derivative  suit:    
litis   pendentia/forum   shopping;   there   was   already   a   pending   case   in   CA    
involving  the  same  parties,  issues  (Alam  nyo  naman  na  elements  eh!).   "An   individual   stockholder   is   permitted   to   institute   a   derivative   suit  
  on   behalf   of   the   corporation   wherein   he   holds   stock   in   order   to  
Nevertheless,  CA  sustained  trial  court’s  ruling.   protect   or   vindicate   corporate   rights,   whenever   the   officials   of   the  
[Ejercito   subsequently   substituted   Demetria   and   Janolo   pursuant   to   an   corporation   refuse   to   sue,   or   are   the   ones   to   be   sued   or   hold   the  
assignment  made  by  the  latter.]   control   of   the   corporation.   In   such   actions,   the   suing   stockholder   is  
  regarded  as  a  nominal  party,  with  the  corporation  as  the  real  party  in  
ISSUE:   interest.   (Gamboa   v.   Victoriano,   90   SCRA   40,   47   [1979];   Emphasis  
WON   there   was   forum   shopping/litis   pendentia   to   justify   the   piercing   of   supplied).    
corporate  veil.    
  Petitioner  also  tried  to  seek  refuge  in  the  corporate  fiction  that  the  personality  
HELD:  [caveat:  lengthy  ruling]   of  the  Bank  is  separate  and  distinct  from  its  shareholders.  But  the  rulings  of  this  
Yes.     The   original   complaint   in   the   court   a   quo   which   gave   rise   to   the   instant   Court   are   consistent:   "When   the   fiction   is   urged   as   a   means   of   perpetrating   a  
petition  was  filed  by  the  buyer  (Demetria  and  Janolo,  and  Ejercito  as  substitute)   fraud   or   an   illegal   act   or   as   a   vehicle   for   the   evasion   of   an   existing   obligation,  
against  the  seller  (Bank)  to  enforce  the  alleged  perfected  sale  of  real  estate.  On   the  circumvention  of  statutes,  the  achievement  or  perfection  of  a  monopoly  or  
the   other   hand,   the   complaint   in   the   Second   Case   seeks   to   declare   such   generally   the   perpetration   of   knavery   or   crime,   the   veil   with   which   the   law  

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covers   and   isolates   the   corporation   from   the   members   or   stockholders   who   Legal  Officer,  he  represented  members  of  the  Francisco  family  in  the  intestate  
compose   it   will   be   lifted   to   allow   for   its   consideration   merely   as   an   aggregation   estate   proceedings   of   the   late   Benita   Trinidad.   However,   even   after   the  
of  individuals."     termination   of   the   proceedings,   his   services   were   not   paid.   Said   family  
  members,  he  said,  were  also  incorporators,  directors  and  officers  of  petitioner.  
Corporate  veil  cannot  be  used  to  shield  an  otherwise  blatant  violation  of   Hence   to   counter   petitioner's   collection   suit,   he   filed   a   permissive   counterclaim  
the  prohibition  against  forum-­‐shopping.   Shareholders,   whether   suing   as   the   for  the  unpaid  attorney's  fees.  
majority   in   direct   actions   or   as   the   minority   in   a   derivative   suit,   cannot   be    
allowed   to   trifle   with   court   processes,   particularly   where,   as   in   this   case,   the   RTC:  In  favor  of  Manuels.  
corporation   itself   has   not   been   remiss   in   vigorously   prosecuting   or   defending    
corporate   causes   and   in   using   and   applying   remedies   available   to   it.   To   rule   RESPONDENT’S    CONTENTION:    That   the   plaintiff-­‐appellant   Francisco   Motors  
otherwise  would  be  to  encourage  corporate  litigants  to  use  their  shareholders   Corporation   is   composed   of   the   heirs   of   the   late   Benita   Trinidad   as   directors  
as  fronts  to  circumvent  the  stringent  rules  against  forum  shopping.   and   incorporators   for   whom   defendant   Gregorio   Manuel   rendered   legal  
  services  in  the  intestate  estate  case  of  their  deceased  mother.  Considering  the  
Ultimately,  what  is  truly  important  to  consider  in  determining  whether  forum-­‐ aforestated   principles   and   circumstances   established   in   this   case,   equity   and  
shopping  exists  or  not  is  the  vexation  caused  the  courts  and  parties-­‐litigant  by  a   justice   demands   plaintiff-­‐appellant's   veil   of   corporate   identity   should   be  
party   who   asks   different   courts   and/or   administrative   agencies   to   rule   on   the   pierced   and   the   defendant   be   compensated   for   legal   services   rendered   to   the  
same   or   related   causes   and/or   to   grant   the   same   or   substantially   the   same   heirs,  who  are  directors  of  the  plaintiff-­‐appellant  corporation."  
reliefs,   in   the   process   creating   the   possibility   of   conflicting   decisions   being      
rendered  by  the  different  fora  upon  the  same  issue.  In  this  case,  this  is  exactly   ISSUE:    
the   problem:   a   decision   recognizing   the   perfection   and   directing   the   WON  the  doctrine  of  pirecing  the  veil  of  corporate  entity  shall  apply.    
enforcement  of  the  contract  of  sale  will  directly  conflict  with  a  possible  decision    
in   the   Second   Case   barring   the   parties   from   enforcing   or   implementing   the   said   HELD:    
sale.  Indeed,  a  final  decision  in  one  would  constitute  res  judicata  in  the  other.   Given   the   facts   and   circumstances   of   this   case,   the   doctrine   of   piercing   the  
  corporate   veil   has   no   relevant   application   here.   Respondent   court   erred   in  
FRANCISCO  MOTORS  COPORATION  vs  CA  &  SPOUSES  MANUEL   permitting  the  trial  court's  resort  to  this  doctrine.  The  rationale  behind  piercing  
  a   corporation's   identity   in   a   given   case   is   to   remove   the   barrier   between   the  
FACTS:   corporation   from   the   persons   comprising   it   to   thwart   the   fraudulent   and   illegal  
Petitioner   filed   a   complaint   against   private   respondents   Gregorio   and   Librada   schemes  of  those  who  use  the  corporate  personality  as  a  shield  for  undertaking  
Manuel   to   recover   P3,412.06,   representing   the   balance   of   the   jeep   body   certain  proscribed  activities.  However,  in  the  case  at  bar,  instead  of  holding  
purchased   by   the   Manuels   from   petitioner;   an   additional   sum   P20,454.80   certain   individuals   or   persons   responsible   for   an   alleged   corporate   act,  
representing   the   unpaid   balance   on   the   cost   of   repair   of   the   vehicle;   and   the  situation  has  been  reversed.  It  is  the  petitioner  as  a  corporation  which  
P6,000.00   for   cost   of   suit   and   attorney's   fees.   To   the   original   balance   on   the   is  being  ordered  to  answer  for  the  personal  liability  of  certain  individual  
price   of   jeep   body   were   added   the   costs   of   repair.     In   their   answer,   private   directors,   officers   and   incorporators   concerned.   Hence,   it   appears   to   us  
respondents   interposed   a   counterclaim   for   unpaid   legal   services   by   Gregorio   that   the   doctrine   has   been   turned   upside   down   because   of   its   erroneous  
Manuel   in   the   amount   ofP50,000   which   was   not   paid   by   the   incorporators,   invocation.   Note   that   according   to   private   respondent   Gregorio   Manuel   his  
directors   and   officers   of   the   petitioner.   The   trial   court   decided   the   case   on   June   services   were   solicited   as   counsel   for   members   of   the   Francisco   family   to  
26,  1985,  in  favor  of  petitioner  in  regard  to  the  petitioner's  claim  for  money,  but   represent   them   in   the   intestate   proceedings   over   Benita   Trinidad's   estate.  
also   allowed   the   counter-­‐claim   of   private   respondents.   Both   parties   appealed.   These  estate  proceedings  did  not  involve  any  business  of  petitioner.  
On   April   15,   1991,   the   Court   of   Appeals   sustained   the   trial   court's   decision.    
Hence,  the  present  petition.  The  Manuels  said  that  he  was  petitioner's  Assistant  

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The   personality   of   the   corporation   and   those   of   its   incorporators,   directors   and   CCC  and  invoked  the  decision  in  Ramoso   vs.   GCC   declaring  that  CCC-­‐Equity  and  
officers   in   their   personal   capacities   ought   to   be   kept   separate.   The   claim   for   other  franchised  companies  were  declared  as  one  corporation.  
legal   fees   against   the   concerned   individual   incorporators,   officers   and   directors    
could  not  be  properly  directed  against  the  corporation  without  violating  basic   ISSUE:    
principles   governing   corporations.   Moreover,   every   action   —   including   a   WON  the  judgment  in  favor  of  petitioner  may  be  executed  against  respondent  
counterclaim  —  must  be  prosecuted  or  defended  in  the  name  of  the  real   General  Credit  Corporation.      
party-­‐in-­‐interest.   It   is   plainly   an   error   to   lay   the   claim   for   legal   fees   of    
private   respondent   Gregorio   Manuel   at   the   door   of   petitioner   (FMC)   HELD:  
rather  than  individual  members  of  the  Francisco  family.   YES.  A  corporation  is  an  artificial  being  created  by  operation  of  law,  having  the  
  right   of   succession   and   the   powers,   attributes,   and   properties   expressly  
The   petition   of   Francisco   motors   is   granted   w/o   prejudice   of   the   private   authorized  by  law  or  incident  to  its  existence.  It  is  an  artificial  being  invested  by  
respondent   to   file   another   suit   against   concerned   members   of   Francisco   law   with   a   personality   separate   and   distinct   from   those   of   the   persons  
family.     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  
REYNOSO  vs.  CA   huge  amounts  of  capital  upon  which  big  business  depends.  
   
FACTS:   When   the   fiction   is   urged   as   a   means   of   perpetrating   a   fraud   or   an   illegal   act   or  
Commercial  Credit  Corporation  (CCC)  decided  to  organize  franchise  companies   as   a   vehicle   for   the   evasion   of   an   existing   obligation,   the   circumvention   of  
in   different   parts   of   the   country   by   resorting   to   decentralization   (branching   statutes,   the   achievement   or   perfection   of   a   monopoly   or   generally   the  
out).   Petitioner   Reynoso   was   designated   as   resident   manager   of   CCC-­‐Quezon   perpetration   of   knavery   or   crime,   the   veil   with   which   the   law   covers   and  
City.   isolates  the  corporation  from  the  members  or  stockholders  who  compose  it  will  
  be  lifted  to  allow  for  its  consideration  merely  as  an  aggregation  of  individuals.  
CCC-­‐QC  entered  into  an  exclusive  management  contract  with  CCC  wherein  CCC-­‐ When  the  mother  corporation  and  its  subsidiary  cease  to  act  in  good  faith  and  
QC   shall   sell,   discount,   or   assign   its   receivables   to   CCC.   However,   this   was   honest  business  judgment,  when  the  corporate  device  is  used  by  the  parent  to  
discontinued   due   to   the   DOSRI   Rule   imposed   by   the   Bangko   Sentral   ng   avoid   its   liability   for   legitimate   obligations   of   the   subsidiary,   and   when   the  
Pilipinas.   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  
In  order  to  avoid  the  new  restriction,  CCC  formed  CCC-­‐Equity.  CCC  transferred   necessarily   abrogated.    It   continues   for   legitimate   objectives.    However,   it   is  
30%   of   its   equity   to   CCC-­‐Equity.   However,   a   complaint   of   sum   of   money   with   pierced  in  order  to  remedy  injustice,  such  as  that  inflicted  in  this  case.  
preliminary  attachment  was  instituted  against  Reynoso.  CCC-­‐Equity  dismissed    
the  employment  of  Reynoso.  The  complaint  alleged  that  Reynoso  embezzled  the   Factually  and  legally,  the  CCC  had  dominant  control  of  the  business  operations  
funds  of  CCC-­‐QC  and  used  it  to  purchase  a  house  and  lot.   of  CCC-­‐QC.    The  exclusive  management  contract  insured  that  CCC-­‐QC  would  be  
  managed  and  controlled  by  CCC  and  would  not  deviate  from  the  commands  of  
The  trial  court  ruled  in  favor  of  Reynoso.   the  mother  corporation.    In  addition  to  the  exclusive  management  contract,  CCC  
Meanwhile,  CCC  became  General  Credit  Corporation  (GCC).  RTC  ordered  GCC  to   appointed  its  own  employee,  petitioner,  as  the  resident  manager  of  CCC-­‐QC.  
file   its   comment.   However,   GCC   opposed   it   and   allege   that   it   was   not   party   to    
the  case.  It  contends  that  it  is  a  corporation  separate  and  distinct  from  CCC-­‐QC   Petitioner’s   designation   as   “resident   manager”   implies   that   he   was   placed   in  
and,   therefore,   its   properties   may   not   be   levied   upon   to   satisfy   the   monetary   CCC-­‐QC   by   a   superior   authority.    In   fact,   even   after   his   assignment   to   the  
judgment  in  favor  of  petitioner.    In  short,  respondent  raises  corporate  fiction  as   subsidiary   corporation,   petitioner   continued   to   receive   his   salaries,   allowances,  
its  defense.  Petitioner  replied  that  CCC-­‐QC  is  an  adjunct,  conduit  and  agency  of   and   benefits   from   CCC,   which   later   became   respondent   General   Credit  

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Corporation.    Not   only   that.    Petitioner   and   the   other   permanent   employees   of   Federation  of  Labor  Unions  (NAFLU),  and  claiming  to  be  the  bargaining  agent  of  
CCC-­‐QC   were   qualified   members   and   participants   of   the   Employees   Pension   the   security   guards,   sent   a   Notice   of   Strike   to   FISI/MISI.   The   members   of   the  
Plan  of  CCC.   union   which   include   petitioners   picketed   the   premises   of   FTC.    The   Regional  
  Trial  Court  of  Pasig,  however,  issued  a  writ  of  injunction  to  enjoin  the  picket.  
There  are  other  indications  in  the  record  which  attest  to  the  applicability  of  the    
identity   rule   in   this   case,   namely:    the   unity   of   interests,   management,   and   Simeon   de   Leon,   together   with   sixteen   (16)   other   complainants   instituted   the  
control;   the   transfer   of   funds   to   suit   their   individual   corporate   conveniences;   instant   case   before   the   Arbitration   Branch   of   the   NLRC.   Petitioners   alleged   that  
and  the  dominance  of  policy  and  practice  by  the  mother  corporation  insure  that   .    They   were   assigned   to   work   as   security   guards   at   the   company's   main   factory  
CCC-­‐QC  was  an  instrumentality  or  agency  of  CCC.   plant,   its   tobacco   redrying   plant   and   warehouse.    They   averred   that   they  
  performed   their   duties   under   the   control   and   supervision   of   FTC's   security  
As  petitioner  stresses,  both  CCC  and  CCC-­‐QC  were  engaged  in  the  same  principal   supervisors.  They   were   severed   from   work   without   valid   cause.   Respondent  
line  of  business  involving  a  single  transaction  process.    Under  their  discounting   FTC,   on   the   other   hand,   maintained   that   there   was   no   employer-­‐employee  
arrangements,   CCC   financed   the   operations   of   CCC-­‐QC.    The   subsidiary   sold,   relationship   between   FTC   and   petitioners.    It   said   that   at   the   time   of   the  
discounted,  or  assigned  its  accounts  receivables  to  CCC.   termination   of   their   services,   petitioners   were   the   employees   of   MISI   which  
  was  a  separate  and  distinct  corporation  from  FTC.    
Paraphrasing   the   ruling   in  Claparols   v.   Court   of   Industrial   Relations,  reiterated    
in  Concept   Builders   Inc.   v.   National   Labor   Relations,  it   is   very   obvious   that   The   Labor   Arbiter   found   respondents   liable   for   the   charges.    Rejecting   FTC's  
respondent   “seeks   the   protective   shield   of   a   corporate   fiction   whose   veil   the   argument   that   there   was   no   employer-­‐employee   relationship   between   FTC   and  
present   case   could,   and   should,   be   pierced   as   it   was   deliberately   and   petitioners,   he   ruled   that   FISI   and   FTC   should   be   considered   as   a   single  
maliciously  designed  to  evade  its  financial  obligation  of  its  employees.”   employer.    On  appeal,  the  NLRC  reversed  and  set  aside  the  decision  of  the  Labor  
  Arbiter.    First,   it   held   that   the   Labor   Arbiter   erred   in   applying   the   "single  
DE  LEON  vs.  NLRC   employer"   principle   and   concluding   that   there   was   an   employer-­‐employee  
  relationship   between   FTC   and   FISI   on   one   hand,   and   petitioners   on   the   other  
FACTS:   hand.    It   found   that   at   the   time   of   the   termination   of   the   contract   of   security  
Fortune  Tobacco  Corporation  (FTC)  and  Fortune  Integrated  Services,  Inc.  (FISI)   services   which,   at   that   time,   had   been   renamed   Magnum   Integrated   Services,  
entered   into   a   contract   for   security   services   where   the   latter   undertook   to   Inc.  had  a  different  set  of  stockholders  and  officers  from  that  of  FTC.    They  also  
provide   security   guards   for   the   protection   and   security   of   the   former.    The   had  separate  offices.    The  NLRC  held  that  the  principle  of  "single  employer"  and  
petitioners   were   among   those   engaged   as   security   guards   pursuant   to   the   the   doctrine   of   piercing   the   corporate   veil   could   not   apply   under   the  
contract.     The   incorporators   and   stockholders   of   FISI   sold   out   lock,   stock   and   circumstances.    
barrel  to  a  group  of  new  stockholders  by  executing  for  the  purpose  a  "Deed  of    
Sale  of  Shares  of  Stock".    On  the  same  date,  the  Articles  of  Incorporation  of  FISI   ISSUE:    
was   amended   changing   its   corporate   name   to   Magnum   Integrated   Services,   Inc.   WON  the  petitioners  interfered  with  the  rights  of  the  workers.  
(MISI).    A   new   by-­‐laws   was   likewise   adopted   and   approved   by   the   Securities    
and  Exchange  Commission.       HELD:  
   An  examination  of  the  facts  of  this  case  reveals  that  there  is  sufficient  ground  
FTC   terminated   the   contract   for   security   services   which   resulted   in   the   to   conclude   that   respondents   were   guilty   of   interfering   with   the   right   of  
displacement  of  some  five  hundred  eighty  two  (582)  security  guards  assigned   petitioners   to   self-­‐organization   which   constitutes   unfair   labor   practice   under  
by   FISI/MISI   to   FTC,   including   the   petitioners   in   this   case.    FTC   engaged   the   Article  248  of  the  Labor  Code.[8]  Petitioners  have  been  employed  with  FISI  since  
services   of   two   (2)   other   security   agencies,   Asian   Security   Agency   and   Ligalig   the  1980s  and  have  since  been  posted  at  the  premises  of  FTC  -­‐-­‐  its  main  factory  
Security  Services.  the  Fortune  Tobacco  Labor  Union,  an  affiliate  of  the  National   plant,   its   tobacco   redrying   plant   and   warehouse.    It   appears   from   the   records  

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that  FISI,  while  having  its  own  corporate  identity,  was  a  mere  instrumentality   PNB  vs.  ANDRADA  
of   FTC,   tasked   to   provide   protection   and   security   in   the   company    
premises.    The   records   show   that   the   two   corporations   had   identical   FACTS:  
stockholders  and  the  same  business  address.    The  stockholders  of  FISI  sold  all   PNB   acquired   the   assets   of   Pampanga   Sugar   Mill   (PASUMIL)   that   were   earlier  
their   participations   in   the   corporation   to   a   new   set   of   stockholders   which   foreclosed   by   DBP.     Prior   to   acquisition,   PASUMIL   engaged   the   services   of  
renamed   the   corporation   Magnum   Integrated   Services,   Inc.   without   any   Andrada   Electric   and   Engineering   Company   for   electrical   rewinding   and   repair,  
reason,  preterminated  its   contract   of   security   services   with   MISI   and   leaving   several   unpaid   accounts.     After   several   partial   payments,   the   total  
contracted   two   other   agencies   to   provide   security   services   for   its   unpaid   balance   amounted   to   P513,263.80.     National   Sugar   Development   Corp.  
premises.  This  resulted  in  the  displacement  of  petitioners.         (NASUDECO),   the   sugar   arm   of   PNB,   took   ownership   and   possession   of   the  
  assets   and   to   nationalize   and   consolidate   its   interest   on   other   PNB   controlled  
“The   test   of   whether   an   employer   has   interfered   with   and   coerced   employees   sugar  mills.  
within  the  meaning  of  section  (a)  (1)  is  whether  the  employer  has  engaged  in    
conduct   which   it   may   reasonably   be   said   tends   to   interfere   with   the   free   Since  PNB  and  NASUDECO  refused  to  pay  the  amount,  Andrada  filed  an  action  
exercise  of  employees'  rights  under  section  3  of  the  Act,  and  it  is  not  necessary   for   the   unpaid   balance   as   well   as   damages.     The   Trial   Court   ruled   in   favor   of  
that   there   be   direct   evidence   that   any   employee   was   in   fact   intimidated   or   Andrada.    CA  affirmed.  
coerced   by   statements   of   threats   of   the   employer   if   there   is   a   reasonable    
inference  that  anti-­‐union  conduct  of  the  employer  does  have  an  adverse  effect   PNB   posit   that   they   should   not   be   held   liable   for   the   corporate   debts   of  
on  self-­‐organization  and  collective  bargaining.”   PASUMIL,  because  their  takeover  of  the  latter's  foreclosed  assets  did  not  make  
  them   assignees.   On   the   other   hand,   Andrada   asserts   that   petitioners   and  
 We   are   not   persuaded   by   the   argument   of   respondent   FTC   denying   the   PASUMIL  should  be  treated  as  one  entity  and,  as  such,  jointly  and  severally  held  
presence  of  an  employer-­‐employee  relationship.    We  find  that  the  Labor  Arbiter   liable  for  PASUMIL's  unpaid  obligation.  
correctly   applied   the   doctrine   of   piercing   the   corporate   veil   to   hold   all    
respondents   liable   for   unfair   labor   practice   and   illegal   termination   of   ISSUE:  
petitioners'  employment.    It  is  a  fundamental  principle  in  corporation  law  that  a   WON  PNB  is  liable  for  the  unpaid  debts  of  PASUMIL  to  Andrada.  
corporation   is   an   entity   separate   and   distinct   from   its   stockholders   and   from    
other   corporations   to   which   it   is   connected.    However,   when   the   concept   of   HELD:  
separate  legal  entity  is  used  to  defeat  public  convenience,  justify  wrong,  protect   No.     As   a   rule,   a   corporation   that   purchases   the   assets   of   another   will   not   be  
fraud  or  defend  crime,  the  law  will  regard  the  corporation  as  an  association  of   liable  for  the  debts  of  the  selling  corporation,  provided  the  former  acted  in  good  
persons,   or   in   case   of   two   corporations,   merge   them   into   one.    The   separate   faith  and  paid  adequate  consideration  for  such  assets,  except  when  any  of  the  
juridical   personality   of   a   corporation   may   also   be   disregarded   when   such   following   circumstances   is   present:   (1)   where   the   purchaser   expressly   or  
corporation  is  a  mere  alter  ego  or  business  conduit  of  another  person.     impliedly  agrees  to  assume  the  debts,  (2)  where  the  transaction  amounts  to  a  
  consolidation   or   merger   of   the   corporations,   (3)   where   the   purchasing  
The   purported   sale   of   the   shares   of   the   former   stockholders   to   a   new   set   of   corporation  is  merely  a  continuation  of  the  selling  corporation,  and  (4)  where  
stockholders  who  changed  the  name  of  the  corporation  to  Magnum  Integrated   the  transaction  is  fraudulently  entered  into  in  order  to  escape  liability  for  those  
Services,  Inc.  appears  to  be  part  of  a  scheme  to  terminate  the  services  of  FISI's   debts.  
security  guards  posted  at  the  premises  of  FTC  and  bust  their  newly-­‐organized    
union   which   was   then   beginning  to  become  active  in  demanding  the  company's   The   question   of   whether   a   corporation   is   a   mere   alter   ego   is   one   of   fact.  
compliance   with   Labor   Standards   laws.    Thus,   we   find   that   the   termination   of   Piercing   the   veil   of   corporate   fiction   may   be   allowed   only   if   the   following  
petitioners'  services  was  without  basis  and  therefore  illegal.       elements  concur:    
   

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(1)  control  —  not  mere  stock  control,  but  complete  domination  —  not  only  of   and  foreign  consumption.  The  Lipats  also  owned  the  “Mystical  Fashions”  in  the  
finances,   but   of   policy   and   business   practice   in   respect   to   the   transaction   United   States,   which   sells   goods   imported   from   the   Philippines   through   BET.  
attacked,   must   have   been   such   that   the   corporate   entity   as   to   this   transaction   Mrs.  Lipat  designated  her  daughter,  Teresita,  to  manage  BET  in  the  Philippines  
had  at  the  time  no  separate  mind,  will  or  existence  of  its  own;     while  she  was  managing  the  “Mystical  Fashions”  in  the  US.  Sometime  in  1979,  
  Teresita,  by  virtue  of  the  special  power  of  attorney,  was  able  to  secure  for  and  
(2)  such  control  must  have  been  used  by  the  defendant  to  commit  a  fraud  or  a   in  behalf  of  her  mother  and  BET,  a  loan  from  Pacific  Bank  amounting  to  P583K  
wrong  to  perpetuate  the  violation  of  a  statutory  or  other  positive  legal  duty,  or   to  buy  fabrics  to  be  manufactured  by  BET  and  exported  to  “Mystical  Fashions”  
a  dishonest  and  an  unjust  act  in  contravention  of  plaintiff's  legal  right;  and     in   the   US.   As   security   therefor,   the   Lipat   spouses   executed   a   Real   Estate  
  Mortgage  over  their  property  in  QC.  Later,  BET  was  incorporated  into  a  family  
(3)  the  said  control  and  breach  of  duty  must  have  proximately  caused  the  injury   corporation   named   Bela’s   Export   Corporation   (BEC).   Eventually,   the   loan   was  
or  unjust  loss  complained  of.       later  restructured  in  the  name  of  BEC  and  subsequent  loans  were  obtained  by  
  BEC   with   the   corresponding   promissory   notes   duly   executed   by   Teresita   on  
The   absence   of   the   foregoing   elements   in   the   present   case   precludes   the   behalf   of   the   corporation.   Unfortunately,   BEC   defaulted   in   its   payments.   The  
piercing  of  the  corporate  veil.  First,  other  than  the  fact  that  petitioners  acquired   real   estate   mortgage   was   foreclosed.   A   certificate   of   sale   was   issued   to  
the  assets  of  PASUMIL,  there  is  no  showing  that  their  control  over  it  warrants   respondent   Eugenio   D.   Trinidad   as   the   highest   bidder.   In   1989,   the   spouses  
the  disregard  of  corporate  personalities.       Lipat   filed   before   the   QC   RTC   a   complaint   for   annulment   of   the   real   estate  
  mortgage.  Trial  Court  pierced  the  veil  of  corporate  fiction  and  held  that  Bela’s  
Second,  there  is  no  evidence  that  their  juridical  personality  was  used  to  commit   Export  Corporation  and  Lipats  are  one  and  the  same.  
a   fraud   or   to   do   a   wrong;   or   that   the   separate   corporate   entity   was   farcically    
used  as  a  mere  alter  ego,  business  conduit  or  instrumentality  of  another  entity   ISSUE:    
or  person.     WON  the  doctrine  of  piercing  the  veil  of  corporate  fiction  is  applicable  
   
Third,  respondent  was  not  defrauded  or  injured  when  petitioners  acquired  the   HELD:    
assets  of  PASUMIL.   Yes.   We   find   that   the   evidence   on   record   demolishes,   rather   than   buttresses,  
  petitioner’s   contention   that   BET   and   BEC   are   separate   business   entities.   Note  
The  court  further  ruled  that  there  is  no  consolidation  or  merger  with  respect  to   that  Mrs.  Lipat  admitted  that  she  and  her  husband  Alfredo,  were  the  owners  of  
PASUMIL  and  PNB.    In  fact,  PASUMIL's  corporate  existence  had  not  been  legally   BET  and  were  two  of  the  incorporators  and  majority  stockholders  of  BEC.  BET  
extinguished   or   terminated.     Further,   prior   to   PNB's   acquisition   of   the   and   BEC   are   one   and   the   same   and   the   latter   is   a   conduit   of   and   merely  
foreclosed   assets,   PASUMIL   had   previously   made   partial   payments   to   succeeded  the  former.  Petitioner’s  attempt  to  isolate  themselves  from  and  hide  
respondent   for   the   former's   obligation.     Neither   did   petitioner   expressly   or   behind  the  corporate  personality  of  BEC  so  as  to  evade  their  liabilities  to  Pacific  
impliedly   agree   to   assume   the   debt   of   PASUMIL   to   respondent.   PNB   shall   study   Bank   is   precisely   what   the   classical   doctrine   of   piercing   the   veil   of   corporate  
and  submit  recommendations  on  the  claims  of  PASUMIL's  creditors.  Clearly,  the   entity   seeks   to   prevent   and   remedy.   In   our   view,   BEC   is   a   mere   continuation  
corporate   separateness   between   PASUMIL   and   PNB   remains,   despite   and   successor   of   BET   and   petitioners   cannot   evade   their   obligations   in   the  
respondent's  insistence  to  the  contrary.   mortgage   contract   secured   under   the   name   of   BEC   on   the   pretext     that   it   was  
  signed  for  the  benefit  and  under  the  name  of  BET.  We  are  thus  constrained  to  
BURGOS  LIPAT  vs.  PACIFIC  BANKING  CORP.   rule   that   the   CA   did   not   err   when   it   applied   the   instrumentality   doctrine     in  
  piercing  the  corporate  veil  of  BEC.  
FACTS:      
Petitioners   Sps.   Lipat   owned   “Bela’s   Export   Trading”   (BET),   a   single  
proprietorship.  BET  was  engaged  in  the  manufacture  of  garments  for  domestic  

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