CAGAYAN VALLEY DRUG CORPORATION v.

COMMISSIONER OF INTERNAL REVENUE

G.R. No. 151413
February 13, 2008

FACTS:
Petitioner granted 20% sales discounts to qualified senior citizens on purchases of
medicine pursuant to RA 7432 and its IRR. Petitioner filed with the BIR a claim for tax
refund/tax credit of the full amount of the 20% sales discount it granted to senior citizens for the
year 1995, in accordance with RA 7432. The BIR’s inaction on petitioner’s claim for refund/tax
credit compelled petitioner to file a petition for review before the CTA, until the case reached the
CA. The CA dismissed the petition because the person who signed the verification and
certification of absence of forum shopping, a certain Jacinto J. Concepcion, President of
petitioner, failed to adduce proof that he was duly authorized by the board of directors to do so.

ISSUE:
Whether or not it is valid when the petitioner’s president signs the subject verification
and certification without the approval of its Board of Directors.

RULING:
Yes.

There is a complete listing of authorized signatories to the verification and certification

required by the rules, the determination of the sufficiency of the authority was done on a case to
case basis. The rationale applied in the foregoing cases is to justify the authority of corporate
officers or representatives of the corporation to sign the verification or certificate against forum
shopping, being in a position to verify the truthfulness and correctness of the allegations in the
petition.
 THE HEIRS OF THE LATE PAJARILLO v. CA
G.R. No. 155056-57
October 19, 2007

FACTS:
Private respondents were employed as drivers, conductors and conductresses by
Panfilo. In sum, each of the private respondents earned an average daily commission of about
P150.00 a day. They were not given emergency cost of living allowance, 13th month pay, legal
holiday pay and service incentive leave pay. The following were deducted from the private
respondents’ daily commissions. Thereafter, private respondents and several co-employees
formed a union called “SAMAHAN NG MGA MANGGAGAWA NG PANFILO V. PAJARILLO”.

Upon learning of the formation of respondent union, Panfilo and his children ordered
some of the private respondents to sign a document affirming their trust and confidence in
Panfilo and denying any irregularities on his part. Other private respondents were directed to
sign a blank document which turned out to be a resignation letter. Private respondents refused
to sign the said documents; hence, they were barred from working or were dismissed without
hearing and notice. Panfilo and his children and relatives also formed a company union where
they acted as its directors and officers.

ISSUE:
Can we apply piercing the veil of corporate entity of PVP Pajarillo Liner Inc.?

RULING:
Yes.

When the notion of separate juridical personality is used to defeat public convenience,
justify wrong, protect fraud or defend crime, or is used as a device to defeat labor laws, this
separate personality of the corporation may be disregarded or the veil of the corporate fiction
pierced. This is true likewise when the corporation is merely an adjunct, a business conduit or
an alter ego of another corporation. The corporate mask may be lifted and the corporate veil
may be pierced when a corporation is but the alter ego of a person or another corporation. It is
clear from the foregoing that P.V. Pajarillo Liner Inc. was a mere continuation and successor of
the sole proprietorship of Panfilo. It is also quite obvious that Panfilo transformed his sole
proprietorship into a family corporation in a surreptitious attempt to evade the charges of
respondent union. Given these considerations, Panfilo and P.V. Pajarillo Liner Inc. should be
treated as one and the same person for purposes of liability.
 PETRON CORPORATION v. NATIONAL LABOR RELATIONS COMMISSION
G.R. No. 154532
October 27, 2006

FACTS:
Petron, through its Cebu District Office, hired the herein private respondent Chito S.
Mantos, an Industrial Engineer, as a managerial, professional and technical employee with
initial designation as a Bulk Plant Engineering Trainee. He attained regular employment status.
It was while assigned at Petron’s Cebu District Office with petitioner Peter Maligro as his
immediate superior, when Mantos, thru a Notice of Disciplinary Action was suspended for 30
days from November 1 to 30, 1996 for violating company rules and regulations regarding
AWOL, not having reported for work during the period August 5 to 27, 1996. Subsequently, his
services was terminated effective December 1, 1996, by reason of his continued absences from
August 28, 1996 onwards, as well as for Insubordination/Discourtesy for making false
accusations against his superior. Meanwhile, contending that he has been constructively
dismissed as of August 5, 1996, Mantos filed with the NLRC-RAB, Cebu City, a complaint for
illegal dismissal.

ISSUE:
Whether or not Maligro is solidarily liable with Petron.

RULING:
No.

In the present case, the apparent basis for the NLRC in holding petitioner Maligro
solidarily liable with Petron were its findings that (1) the Investigation Committee was created a
day after the summons in NLRC RAB was received, with Maligro no less being the chairman
thereof; and (2) the basis for the charge of insubordination was the private respondent’s alleged
making of false accusations against Maligro. Those findings, however, cannot justify a finding of
personal liability on the part of Maligro inasmuch as said findings do not point to Maligro’s
extreme personal hatred and animosity with the respondent. It cannot, therefore, be said that
Maligro was motivated by malice and bad faith in connection with private respondent’s dismissal
from the service.
 CHINA BANKING CORPORATION v. DYNE-SEM ELECTRONICS CORPORATION
G.R. No. 149237
June 11, 2006

FACTS:
Dynetics, Inc. (Dynetics) and Elpidio O. Lim borrowed a total of P8,939,000 from
petitioner China Banking Corporation evidenced by six promissory notes. The borrowers failed
to pay when the obligations became due prompting the petitioner to institute a complaint for sum
of money against them.

Summons was not served on Dynetics, however, because it had already closed down.
An amended complaint was filed by petitioner impleading respondent Dyne-Sem Electronics
Corporation (Dyne-Sem) and its stockholders Vicente Chuidian, Antonio Garcia and Jacob
Ratinoff. According to petitioner, respondent was formed and organized to be Dynetics alter ego
as established by the following circumstances: (a) Dynetics, Inc. and respondent are both
engaged in the same line of business of manufacturing, producing, assembling, processing,
importing, exporting, buying, distributing, marketing and testing integrated circuits and
semiconductor devices; (b) the principal office and factory site of Dynetics, Inc. located at
Avocado Road, FTI Complex, Taguig, Metro Manila, were used by respondent as its principal
office and factory site; (c) respondent acquired some of the machineries and equipment of
Dynetics, Inc. from banks which acquired the same through foreclosure; (d) respondent retained
some of the officers of Dynetics, Inc.

ISSUE:
Whether the Doctrine of Piercing the Veil of Corporate Fiction is applicable in the present
case.

RULING:
Yes.

In this case, petitioner failed to prove that Dyne-Sem was organized and controlled, and
its affairs conducted, in a manner that made it merely an instrumentality, agency, conduit or
adjunct of Dynetics, or that it was established to defraud Dynetics creditors, including petitioner.

The veil of separate corporate personality may be lifted when such personality is used to
defeat public convenience, justify wrong, protect fraud or defend crime; or used as a shield to
confuse the legitimate issues; or when the corporation is merely an adjunct, a business conduit
or an alter ego of another corporation 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; or when the corporation is used as a cloak or cover for fraud or
illegality, or to work injustice, or where necessary to achieve equity or for the protection of the
creditors. In such cases, the corporation will be considered as a mere association of persons.
The liability will directly attach to the stockholders or to the other corporation. To disregard the
separate juridical personality of a corporation, the wrongdoing must be proven clearly and
convincingly.
 MARUBENI CORPORATION v. FELIX LIRAG
G.R. No. 130998
August 10, 2001

FACTS:
Lirag filed with the RTC of Makati a complaint for specific performance and damages in
the sum of P6M as commission pursuant to an oral consultancy agreement with Marubeni for
obtaining government contracts of various projects. Lirag claimed that on February 2, 1987,
petitioner Ryohei Kimura hired his consultancy group for the purpose of obtaining government
contracts of various projects. The agreement was merely oral because of the mutual trust
between Marubeni and the Lirag family which dates back to the 1960s. One of the projects
handled by respondent Lirag, the Bureau of Post project, amounting to P100,000,000.00 was
awarded to the “Marubeni-Sanritsu tandem. Despite repeated demands of his 6% commission
was never paid.

Marubeni claimed that Ryohei Kimura did not have the authority to enter into such
agreement in their behalf. Only the general manager, upon issuance of a SPA by the principal
office in Tokyo, Japan, could enter into any contract in behalf of the corporation. They also
claimed that Marubeni never participated in the Bureau of Post project nor benefited from such
project.

ISSUE:
Whether or not there was a consultancy agreement to make Lirag entitled to
commission.

RULING:
No.

Any agreement entered into because of the actual or supposed influence which the
party has, engaging him to influence executive officials in the discharge of their duties, which
contemplates the use of personal influence and solicitation rather than an appeal to the
judgment of the official on the merits of the object sought is contrary to public policy.
Consequently, the agreement, assuming that the parties agreed to the consultancy, is null and
void as against public policy. Therefore, it is unenforceable before a court of justice.

The only basis of Lirag in claiming from Marubeni was because he claims that they are
sister companies since Marubeni was the supplier and contractor of the Sanritsu. Not because
two foreign companies came from the same country and closely worked together on certain
projects would the conclusion arise that one was the conduit of the other, thus piercing the veil
of corporate fiction.
 ADALIA B. FRANCISCO v. RITA C. MEJIA
G.R. No. 141617
August 14, 2001

FACTS:
Gutierrez was the registered owner of a parcel of land which was later subdivided into
five lots. In 1964, Gutierrez and Cardale Financing and Realty Corporation executed a Deed of
Sale with Mortgage relating to the four of the five lots for the consideration of P800,000.00.
Upon the execution of the deed, Cardale paid Gutierrez P171,000.00. To secure payment of the
balance of the purchase price, Cardale constituted a mortgage on three of the four parcels of
land.

In 1968, owing to Cardale's failure to settle its mortgage obligation, Gutierrez filed a
complaint for rescission of the contract with the Quezon City Regional Trial Court. In 1969,
during the pendency of the rescission case, Gutierrez died and was substituted by her
executrix, respondent Rita C. Mejia. In the meantime, the mortgaged parcels of land became
delinquent in the payment of real estate taxes, which culminated in their levy and auction sale in
satisfaction of the tax arrears. The highest bidder for the three parcels of land was petitioner
Merryland Development Corporation, whose President and majority stockholder is Francisco.

ISSUE:
Can the corporate fiction of Cardale will be pierced?

RULING:
Yes.

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.
 PHILIPPINE NATIONAL BANK v. ANDRADA ELECTRIC & ENGINEERING COMPANY
GR No. 142936
April 17, 2002

FACTS:
PNB acquired the assets of the defendant PASUMIL that were earlier foreclosed by the
DBP. PNB organized the defendant NASUDECO in September, 1975, to take ownership and
possession of the assets and ultimately to nationalize and consolidate its interest in other PNB
controlled sugar mills; that prior to October 29, 1971, the defendant PASUMIL engaged the
services of defendant for electrical rewinding and repair, most of which were partially paid by the
defendant PASUMIL, leaving several unpaid accounts with the plaintiff; that finally, on October
29, 1971, the plaintiff and the defendant PASUMIL entered into a construction contract.

The defendant PASUMIL and the defendant PNB, and now the defendant NASUDECO,
failed and refused to pay the plaintiff their just, valid and demandable obligation based on the
contract. Defendant prayed that judgment be rendered against the defendants PNB,
NASUDECO, and PASUMIL.

ISSUE:
Can the Veil of Corporate Fiction should be pierced in this case?

RULING:
No.

Being the party that asked for the piercing of the corporate veil, respondent had the
burden of presenting clear and convincing evidence to justify the setting aside of the separate
corporate personality rule. However, it utterly failed to discharge this burden; it failed to
establish by competent evidence that petitioner’s separate corporate veil had been used to
conceal fraud, illegality or inequity.

The absence of the elements in the present case precludes the piercing of the corporate
veil. First, other than the fact that petitioners acquired the assets of PASUMIL, there is no
showing that their control over it warrants the disregard of corporate personalities. Second,
there is no evidence that their juridical personality was used to commit 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 or person. Third, respondent was not defrauded or injured
when petitioners acquired the assets of PASUMIL.
 AZCOR MANUFACTURING INC. v. NATIONAL LABOR RELATIONS COMMISSION
G.R. No. 117963
February 11, 1999

FACTS:
On February 1991, Capulso requested to go on sick leave, it appearing that his illness
was directly caused by his occupation. Upon recovering, Capulso was not allowed to resume
work and was not reinstated after having tried five times. He filed a complaint for constructive
illegal dismissal and illegal deduction against AZCOR and Arturo Zuluaga.

AZCOR moved to dismiss the complaint alleging that no employer- employee

relationship existed. Petitioner further added that Capulso became an employee of Fil Paso on
March 1990 but voluntarily resigned after a year as evidenced by a letter of resignation allegedly
tendered by Capulso. The Labor Arbiter dismissed the complaint for lack of merit and ordered
AZCOR to refund the deducted salaries. On Appeal, the NLRC ruled that the Contract of
Employment stated that the work to be done by Capulso was with Fil Paso and added the fact
that the latter denied having executed and signed the said resignation letters. Pending the trial
of AZCOR’s petition for Certiorari, Capulso succumbed to asthma and heart disease.

ISSUE:
Are the petitioners jointly liable for backwages in favor of the heirs?

RULING:
Yes.

In the case, the corporate fiction was used as a means to perpetrate a social injustice or
as a vehicle to evade obligations or confuse the legitimate issues. Such corporate fiction would
be discarded and the two (2) corporations would be merged as one, the first being merely
considered as the instrumentality, agency, conduit or adjunct of the other.

Capulso was led into believing that while he was working with Filipinas Paso, his real
employer was AZCOR. Petitioners never dealt with him openly and in good faith, nor was he
informed of the developments within the company, i.e., his alleged transfer to Filipinas Paso and
the closure of AZCOR's manufacturing operations beginning 1 March 1990. AZCOR manifested
for the first time before the Court that it had already ceased its business operations.
Understandably, Capulso sued AZCOR alone and was constrained to implead Filipinas Paso as
additional respondent only when it became apparent that the latter also appeared to be his
employer.
 EDUARDO CLAPAROLS et al v. CIR
G.R. No. L-30822
July 31, 1975

FACTS:
In a case filed by private respondents against petitioners for unfair labor practices, CIR
held petitioners liable for reinstatement and back wages from the date of their dismissal up to
their actual reinstatement. Motion for execution was granted and an examination of petitioners’
payrolls and other records for the computation of the back wages. When respondents returned
to work, the company accountant refused on the ground that there was no order from the plant
owner.

ISSUE:
Are CSNP and CSC one and the same corporation?

RULING:
Yes.

Indeed the CSNP, which ceased operation in June 30, 1957, was succeeded by the
CSC effective next day, July 1, 1957 up top December 7, 1962, when the latter finally ceased to
operate, were not disputed by petitioners. It is very clear that the latter was a continuation and
successor of the first entity, and its emergence was skillfully timed to avoid the financial liability
that already attached to its predecessor. Both corporations were owned and controlled by
petitioner Eduardo Claparols and there was no break in the succession and continuity of the
same business. This “avoiding-the-liability” scheme is very patent, considering that 90% of the
subscribed shares of the CSC were owned by Claparols himself, and all the assets of the
dissolved CSNP were turned over to the CSC.
COMPLEX ELECTRONICS EMPLOYEES ASSOCIATION (CEEA) v. THE NATIONAL LABOR
RELATIONS COMMISSION
G.R. No. 121315
July 19, 1999

FACTS:
The rank and file workers of Complex were organized into a union known as the
Complex Electronics Employees Association, herein referred to as the Union. Due to its
financial reverses, Complex regretfully informed the employees that it was left with no
alternative but to close down the operations of the Lite-On Line. The Union on the other hand
filed a notice of strike with the NCMB. In the evening of April 6, 1992, the machinery, equipment
and materials being used for production at Complex were pulled-out from the company
premises and transferred to the premises of Ionics at Cabuyao, Laguna. The following day, a
total closure of company operation was effected at Complex.

A complaint was, thereafter, filed with the Labor Arbitration Branch of the NLRC for
unfair labor practice. Ionics was impleaded as a party defendant because the officers and
management personnel of Complex were also holding office at Ionics with Lawrence Qua as the
President of both companies.

ISSUE:
Whether or not Complex and Ionics are one and the same.

RULING:
Yes.

Ionics may be engaged in the same business as that of Complex, but this fact alone is
not enough reason to pierce the veil of corporate fiction of the corporation. Well-settled is the
rule that a corporation has a personality separate and distinct from that of its officers and
stockholders. This fiction of corporate entity can only be disregarded in certain cases such as
when it is used to defeat public convenience, justify wrong, protect fraud, or defend crime. To
disregard said separate juridical personality of a corporation, the wrongdoing must be clearly
and convincingly established.
 FRANCISCO MOTORS v. COURT OF APPEAL
G.R. No. 100812
June 25, 1999

FACTS:
This case arose from the decision of the trial court granting the counter claim of the
herein private respondents. Such counterclaim is based from the fact that Gregorio Manuel,
while he was petitioner’s Assistant Legal Officer, he represented members of the Francisco
family in the intestate estate proceedings of the late Benita Trinidad.

However, even after the termination of the proceedings, his services were not paid. Said
family members, he said, were also incorporators, directors and officers of petitioner. Hence to
counter petitioner’s collection suit, he filed a permissive counterclaim for the unpaid attorney’s
fees.

ISSUE:
Can the petitioner corporation be held liable for the attorney’s fee owing to the
respondents.

RULING:
No.

In this case, the piercing of the corporate veil was not applied because rationale behind
piercing a corporation’s identity in a given case is to remove the barrier between the corporation
from the persons comprising it to thwart the fraudulent and illegal schemes of those who use the
corporate personality as a shield for undertaking certain proscribed activities. However, in the
case at bar, instead of holding certain individuals or persons responsible for an alleged
corporate act, the situation has been reversed. It is the petitioner as a corporation which is being
ordered to answer for the personal liability of certain individual directors, officers and
incorporators concerned. Furthermore, according to private respondent Gregorio Manuel his
services were solicited as counsel for members of the Francisco family to represent them in the
intestate proceedings over Benita Trinidad’s estate. These estate proceedings did not involve
any business of petitioner.
 SOL LAGUIO et al v. NATIONAL LABOR RELATIONS COMMISSION
G.R. No. 108936
October 4, 1996

FACTS:
On December 20, 1989, or after almost a year of operation, April posted a memorandum
within its premises and circulated a copy of the same among its employees informing them of its
dire financial condition. April decided to shorten its corporate term "up to February 28, 1990,” In
view of April's cessation of operations, petitioners who initially composed of seventy-seven
employees below filed a complaint for "illegal shutdown/retrenchment/dismissal and unfair labor
practice." On June 21, 1990, petitioners amended their complaint to implead private respondent
Well World Toys, Inc. (Well World for brevity), a corporation also engaged in the manufacture of
stuffed toys for export.

Petitioners further alleged that the original incorporators and principal officers of April
were likewise the original incorporators of Well World, thus both corporations should be treated
as one corporation liable for their claims. The Labor Arbiter found as valid the closure of April,
and treated April and Well World as two distinct corporations.

ISSUE:
Are April and Well World two distinct corporations?

RULING:
Yes.

The two corporations have two different set of officers managing their respective affairs
in two separate offices. It is basic that a corporation is 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.

Mere substantial identity of the incorporators of the two corporations does not
necessarily imply fraud, nor warrant the piercing of the veil of corporate fiction. In the absence of
clear and convincing evidence that April and Well World's corporate personalities were used to
perpetuate fraud, or circumvent the law said corporations were rightly treated as distinct and
separate from each other.
 RUFINA LUY LIM v. COURT OF APPEALS
G.R. No. 124715
January 24, 2000

FACTS:
Petitioner Rufina Luy Lim is the surviving spouse of late Pastor Y. Lim whose estate is
the subject of probate proceedings. The respondent herein is the owner of the properties
subject of this. Said properties were included in the inventory of estate late Pastor Lim.

The respondents moved for the exclusion of said properties which was denied by the
trial court. Petitioner contended upon filing an amended petition that the properties were actually
owned by Pastor Lim and the same were registered under his name, hence they should be
included in the inventory of his estate, and that during his lifetime, he organized and wholly-
owned the five corporations, which are the private respondents in the instant case.

ISSUE:
Is the doctrine of piercing the corporate veil is applicable in the case?

RULING:
No.

The test in determining the applicability of the doctrine of piercing the veil of corporate
fiction is as follows: 1) 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; (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 plaintiffs legal right; and (3) The aforesaid control and breach of
duty must proximately cause the injury or unjust loss complained of. The absence of any of
these elements prevents piercing the corporate veil. In this case there is no showing that the
elements are present. Furthermore, it was proven that said properties were registered in the
name of the corporation, hence the same were owned by the corporation despite the fact that,
assuming true, it was Pastor Lim who organized the corporation.