1. GREGORIO ARANETA, INC., vs.
vs. PAZ TUASON DE PATERNO and JOSE VIDAL The ban of paragraph 2 of article 1459 connotes the idea of trust and confidence; and so where the relationship
GR No. L-2886, August 22, 1952
Digest Author : Gutierrez
Petitioner/s: GREGORIO ARANETA, INC
Respondent/s: PAZ TUASON DE PATERNO and JOSE VIDAL
DOCTRINE: In this case, corporate fiction should not be disregarded because the corporate entity was
not used to perpetuate fraud nor circumventnor circumvent the law and the disregard of the technicality
would pave the way for the evasion of a legitimate and binding commitment. The courts will not ignore
the corporate entity in order to further the perpetration of a fraud
FACTS :
 Paz Tuason de Paterno is the registered owner of a big block of residential land in the district of Santa
Mesa, Manila. Most of these lots were occupied by lessees who had contracts of lease and carried a
stipulation of a right of first refusal in favor of the lessees.
 Paz Tuason obtained from Jose Vidal several loans and constituted a mortgage on the aforesaid property
to secure the debt.
 Paz Tuason decided to sell the entire property for the net amount of P400,000 and entered into
negotiations with Gregorio Araneta, Inc. for this purpose.
 This contract provided that subject to the preferred right of the lessees and that of Jose Vidal as
mortgagee, Paz Tuason would sell to Gregorio Araneta, Inc. the subject lot Most of the tenants who held
contracts of lease took advantage of the opportunity thus extended and after making the stipulated
payments were given their deeds of conveyance.
 With the elimination of the lots sold or be sold to the tenants there remained unencumbered, except for the
mortgage to Jose Vidal, Tuason and Gregorio Araneta, Inc then executed a deed of absolute sale whereby
Gregorio Araneta, Inc paid the 90% of the price of the subject lot, a part of which will be used by Tuason
to pay his debt to Vidal. The 10% balance of the purchase price not yet paid will be paid by the Gregorio
Araneta, Inc to Tuason when the existing mortgage over the property Vendee is duly cancelled in the
office of the Register of Deeds.
 Paz Tuason offered to Vidal the check in full settlement of her mortgage obligation, but the mortgagee had
refused to receive that check or to cancel the mortgage, contending that by the separate agreement before
mentioned payment of the mortgage was not to be effected totally or partially before the end of four years.
 Because of this refusal of Vidal, Paz Tuason commenced an action against the mortgagee but this action
never came on for trial and the record and the checks were destroyed during the war.
 Paz Tuason after liberation repudiated the sale asserting the it is invalid because it was made to her
agent, Jose Araneta who is at the same time the President of Gregorio Araneta, Inc and therefore
the corporate fiction should be disregarded the same being not valid under Art 1459 of the Spanish
Civil Code which provides that ‘’a purchase by an agent of the property of the principal is void’’.
ISSUE: Whether the Piercing Doctrine can be employed in the case - NO
RULING + RATIO:
Piercing Doctrine does not fit in with the facts of the case at bar. Gregorio Araneta, Inc. had long been
organized and engaged in real estate business. The corporate entity was not used to circumvent the law or
perpetrate deception. There is no denying that Gregorio Araneta, Inc. entered into the contract for itself and for
its benefit as a corporation. The contract and the roles of the parties who participated therein were exactly as
they purported to be and were fully revealed to the seller. There is no pretense, nor is there reason to suppose,
that if Paz Tuason had known Jose Araneta as Gregorio Araneta, Inc's president, which she knew, she would not
have gone ahead with the deal. From her point of view and from the point of view of public interest, it would
have made no difference, except for the brokerage fee, whether Gregorio Araneta, Inc. or Jose Araneta was the
purchaser. Under these circumstances the result of the suggested disregard of a technicality would be, not to
stop the commission of deceit by the purchaser but to pave the way for the evasion of a legitimate and
binding commitment buy the seller. The principle invoked by the defendant is resorted to by the courts as a
measure or protection against deceit and not to open the door to deceit. "The courts," it has been said, "will
not ignore the corporate entity in order to further the perpetration of a fraud."
The corporate theory aside, and granting for the nonce that Jose Araneta and Gregorio Araneta, Inc. were
identical and that the acts of one where the acts of the other, the relation between the defendant and Jose
Araneta did not fall within the purview of article 1459 of the Spanish Civil Code.
does not involve considerations of good faith and integrity the prohibition should not and does not apply. To
come under the prohibition, the agent must be in a fiduciary with his principal. Tested by this standard, Jose
Araneta was not an agent within the meaning of article 1459. He was to be nothing more than a go-between or
middleman between the defendant and the purchaser, bringing them together to make the contract themselves.
_____________________________________________________________________________
2. Boyer-Roxas vs. Court of Appeals
G.R. No. 100866. July 14, 1992
Digest Author : Daguinod
Petitioner/s : REBECCA BOYER-ROXAS and GUILLERMO ROXAS
Respondent/s : HON. COURT OF APPEALS and HEIRS OF EUGENIA V. ROXAS, INC
DOCTRINE: The separate personality of the corporation may be disregarded only 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
when necessary for the protection of the creditors.
FACTS
- The questioned properties belonged to Eugenia V. Roxas. After her death, the heirs of Eugenia V.
Roxas, among them the petitioners herein, decided to form a corporation - Heirs of Eugenia V.
Roxas, Incorporated (private respondent herein) with the inherited properties as capital of the
corporation.
- The corporation was incorporated on with the primary purpose of engaging in agriculture to develop
the inherited properties. The Articles of Incorporation of the respondent corporation were amended
in 1971 to allow it to engage in the resort business. Accordingly, the corporation put up a resort
known as Hidden Valley Springs Resort where the questioned properties are located.
- In the case of petitioner Rebecca Boyer-Roxas (Civil Case No. 802-84-C), the respondent
corporation alleged that Rebecca is in possession of two (2) houses, one of which is still under
construction, built at the expense of the respondent corporation; and that her occupancy on the two
(2) houses was only upon the tolerance of the respondent corporation
- In the case of petitioner Guillermo Roxas (Civil Case No. 803-84-C), the respondent corporation
alleged that Guillermo occupies a house which was built at the expense of the former during the time
when Guillermo’s father, Eriberto Roxas, was still living and was the general manager of the
respondent corporation; that the house was originally intended as a recreation hall but was converted
for the residential use of Guillermo; and that Guillermo’s possession over the house and lot was only
upon the tolerance of the respondent corporation.
- In both cases, the respondent corporation alleged that the petitioners never paid rentals for the use of
the buildings and the lots and that they ignored the demand letters for them to vacate the buildings.
- At the RTC, private respondent presented its evidence averring that the subject premises are owned
by the corporation. Petitioners failed to present their evidence due to alleged negligence of their
counsel. RTC handed a decision in favor of private respondent.
- Petitioners appealed to the Court of Appeals but the latter denied the petition and affirmed the ruling
of the RTC
Petitioner’s Contentions
- They are heirs of Eugenia V. Roxas and therefore, co-owners of the Hidden Valley Springs Resort;
and as co-owners of the property, they have the right to stay within its premises.
- The petitioners maintain that their possession of the questioned properties must be respected in view
of their ownership of an aliquot portion of all the properties of the respondent corporation being
stockholders thereof. They propose that the veil of corporate fiction be pierced, considering the
circumstances under which the respondent corporation was formed
- The respondent Court erred in not holding that petitioners were in fact denied due process or their
day in court brought about by the gross negligence of their former counsel.
- The respondent Court misapplied the law when it ordered petitioner Rebecca Boyer-Roxas to
remove the unfinished building in RTC Case No. 802-84-C, when the trial court opined that she
spent her own funds for the construction thereof.
ISSUE:
Whether petitioners’ contention of piercing the corporate veil applicable? - NO
Whether petitioners’ contention that they should be respected as regards their occupancy since they own an
aliquot part of the corporation correct? - NO
RULING + RATIO:
The respondent is a bona fide corporation. As such, it has a juridical personality of its own separate from the
members composing it. There is no dispute that title over the questioned land where the Hidden Valley Springs
Resort is located is registered in the name of the corporation. The records also show that the staff house being
occupied by petitioner Rebecca Boyer- Roxas and the recreation hall which was later on converted into a
residential house occupied by petitioner Guillermo Roxas are owned by the respondent corporation. Regarding
properties owned by a corporation, we stated in the case of Stockholders of F. Guanzon and Sons, Inc. v.
Register of Deeds of Manila, (6 SCRA 373 [1962]):
x x x x xx Properties registered in the name of the corporation are owned by it as an entity separate and distinct
from its members. While shares of stock constitute personal property, they do not represent property of the
corporation. The corporation has property of its own which consists chiefly of real estate (Nelson v. Owen, 113
Ala., 372, 21 So. 75; Morrow v. Gould, 145 Iowa 1, 123 N.W. 743). A share of stock only typifies an aliquot
part of the corporation’s property, or the right to share in its proceeds to that extent when distributed according
to law and equity (Hall & Faley v. Alabama Terminal, 173 Ala., 398, 56 So. 235), but its holder is not the
owner of any part of the capital of the corporation (Bradley v. Bauder, 36 Ohio St., 28). Nor is he entitled to
the possession of any definite portion of its property or assets (Gottfried v. Miller, 104 U.S., 521; Jones v.
Davis, 35 Ohio St., 474). The stock-holder is not a co-owner or tenant in common of the corporate property
(Harton v. Johnston, 166 Ala., 317, 51 So., 992). (at pp. 375-376)
The petitioners point out that their occupancy of the staff house which was later used as the residence of
Eriberto Roxas, husband of petitioner Rebecca Boyer-Roxas and the recreation hall which was converted into a
residential house were with the blessings of Eufrocino Roxas, the deceased husband of Eugenia V. Roxas, who
was the majority and controlling stockholder of the corporation. In his lifetime, Eufrocino Roxas together with
Eriberto Roxas, the husband of petitioner Rebecca Boyer-Roxas, and the father of petitioner Guillermo Roxas
managed the corporation. The Board of Directors did not object to such an arrangement. The petitioners argue
that x x x the authority thus given by Eufrocino Roxas for the conversion of the recreation hall into a residential
house can no longer be questioned by the stockholders of the private respondent and/or its board of directors for
they impliedly but no less explicitly delegated such authority to said Eufrocino Roxas.
Again, we must emphasize that the respondent corporation has a distinct personality separate from its members.
The corporation transacts its business only through its officers or agents. (Western Agro Industrial Corporation
v. Court of Appeals, supra) Whatever authority these officers or agents may have is derived from the
board of directors or other governing body unless conferred by the charter of the corporation. An
officer’s power as an agent of the corporation must be sought from the statute, charter, the by-laws or in
a delegation of authority to such officer, from the acts of the board of directors, formally expressed or
implied from a habit or custom of doing business.
In the present case, the record shows that Eufrocino V. Roxas who then controlled the management of the
corporation, being the majority stockholder, consented to the petitioners’ stay within the questioned properties.
Specifically, Eufrocino Roxas gave his consent to the conversion of the recreation hall to a residential house,
now occupied by petitioner Guillermo Roxas. The Board of Directors did not object to the actions of Eufrocino
Roxas. The petitioners were allowed to stay within the questioned properties until August 27, 1983, when the
Board of Directors approved a Resolution ejecting the petitioners.
We find nothing irregular in the adoption of the Resolution by the Board of Directors. The petitioners’ stay
within the questioned properties was merely by tolerance of the respondent corporation in deference to the
wishes of Eufrocino Roxas, who during his lifetime, controlled and managed the corporation. Eufrocino Roxas’
actions could not have bound the corporation forever. The petitioners have not cited any provision of the
corporation by-laws or any resolution or act of the Board of Directors which authorized Eufrocino Roxas to
allow them to stay within the company premises forever. We rule that in the absence of any existing contract
between the petitioners and the respondent corporation, the corporation may elect to eject the petitioners at any
time it wishes for the benefit and interest of the respondent corporation.
The petitioners’ suggestion that the veil of the corporate fiction should be pierced is untenable. The
separate personality of the corporation may be disregarded only 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 when necessary for the
protection of the creditors.
The circumstances in the present cases do not fall under any of the enumerated categories.
Dispositive Portion: WHEREFORE, the present petition is partly GRANTED. The questioned decision of the
Court of Appeals affirming the decision of the Regional Trial Court of Laguna, Branch 37, in RTC Civil Case
No. 802-84-C is MODIFIED in that subparagraphs (c) and (d) of Paragraph 1 of the dispositive portion of the
decision are deleted. In their stead, the petitioner Rebecca Boyer-Roxas and the respondent corporation are
ordered to follow the provisions of Article 448 of the Civil Code as regards the questioned unfinished building
in RTC Civil Case No. 802-84-C. The questioned decision is affirmed in all other respects.
Additional Notes:
Application of builder in good faith rule
The construction of the unfinished building started when Eriberto Roxas, husband of Rebecca Boyer-Roxas,
was still alive and was the general manager of the respondent corporation. The couple used their own funds to
finance the construction of the building. The Board of Directors of the corporation, however, did not object to
the construction. They allowed the construction to continue despite the fact that it was within the property of the
corporation. Under these circumstances, we agree with the petitioners that the provision of Article 453 of the
Civil Code should have been applied by the lower courts, hence, in such a case, the provisions of Article 448 of
the Civil Code govern the relationship between petitioner Rebecca Boyer-Roxas and the respondent
corporation.
Alleged Negligence of petitioners’ Counsel
The well-settled doctrine is that the client is bound by the mistakes of his lawyer. This rule, however, has its
exceptions. Thus, in several cases, we ruled that the party is not bound by the actions of his counsel in case the
gross negligence of the counsel resulted in the client’s deprivation of his property without due process of law.
In the case, petitioners’ did not take steps to change their counsel or make him attend to their cases until it was
too late. On the contrary, they continued to retain the services of Atty. Manicad knowing fully well his lapses
vis-a-vis their cases. They, therefore, cannot raise the alleged gross negligence of their counsel resulting in
their denial of due process to warrant the reversal of the lower court’s decision.
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3. Siain Enterprises v. Cupertino Realty
G.R. No. 170782. June 22, 2009
Author: Cornelio
Petitioner: SIAIN ENTERPRISES, INC.
Respondent (s): CUPERTINO
REALTY CORP. and EDWIN R. CATACUTAN
DOCTRINE: As a general rule, a corporation will be deemed a separate legal entity until sufficient
reason to the contrary appears. But the rule is not absolute. A corporation’s separate and distinct legal
personality may be disregarded and the veil of corporate fiction pierced when the notion of legal entity is
used to defeat public convenience, justify wrong, protect fraud, or defend crime.
FACTS:
 Siain Enterprises, Inc. obtained a loan of P37M from Cupertino Realty Corp covered by a
promissory note signed by both petitioners and Cupertinos respective presidents, Cua Le Leng and
Wilfredo Lua.
 The promissory note authorizes Cupertino, as the creditor, to place in escrow the loan proceeds
of P37M with Metropolitan Bank & Trust Company to pay off Siain Ent.’s loan obligation with
DBP.
 To secure the loan, Siain Ent., on the same date, executed a real estate mortgage over 2 parcels of
land and other immovables, such as equipment and machineries.
 Thereafter, the parties executed an amendment to promissory note which provided for a 17% interest
per annum on the said loan.
  The amendment to promissory note was likewise signed by Cua Le Leng and Wilfredo Lua on
behalf of Siain Ent. and Cupertino, respectively.
 Cua Le Leng signed a second promissory note in favour of Cupertino for P160M.
 Cua Le Leng signed the second promissory note as maker, on behalf of Siain Ent., and as co-maker,
liable to Cupertino in her personal capacity.
 Contrary to the tenor of the foregoing loan documents, Siain Ent. wrote Cupertino and demanded the
release of the P160M loan increase covered by the amendment of real estate mortgage.
 Cupertino responded and denied that it had yet to release the P160M loan.
 Cupertino maintained that Siain Ent. had long obtained the proceeds of the aforesaid loan.
 It declared Siain Ent.’s demand as made to abscond from a just and valid obligation, a mere
afterthought, following Cupertinos letter demanding payment of the P37,000,000.00 loan covered by
the first promissory note which became overdue.
 Hence, Cupertino instituted extrajudicial foreclosure proceedings over the properties subject of the
amended real estate mortgage.
 This prompted petitioner to file a complaint with a prayer for a restraining order to enjoin Notary
Public Catacutan from proceeding with the public auction.
Ruling of the Lower Courts:
 RTC rendered a decision dismissing petitioners complaint and ordering it to pay
Cupertino P100,000.00 each for actual and exemplary damages, and P500,000.00 as attorneys fees.
 CA affirmed.
Contention of the Petitioner:
 Siain Ent. avers that the amended real estate mortgage does not accurately reflect the agreement
between the parties as, at the time it signed the document, it actually had yet to receive the amount
of P160,000,000.00.
 Lastly, it contends that the lower courts erroneously applied the doctrine of piercing the veil of
corporate fiction when both gave credence to Cupertinos evidence showing that petitioners affiliates
were the previous recipients of part of the P160,000,000.00 indebtedness of petitioner to Cupertino.
ISSUE: Whether the lower courts correctly applied the doctrine of piercing the veil of corporate fiction – YES
RULING: The court agrees with the lower courts.
First. All the loan documents, on their face, unequivocally declare petitioners indebtedness to Cupertino.
Second. The foregoing notwithstanding, petitioner insists that the Amended Real Estate Mortgage was not
supported by a consideration, asserting non-receipt of the P160,000,000.00 loan increase reflected in the
Amended Real Estate Mortgage. However, petitioners bare-faced assertion does not even dent, much less,
overcome the aforesaid presumptions on consideration for a contract.
Third. Petitioner bewails the lower courts application of the doctrine of piercing the veil of corporate fiction.
As a general rule, a corporation will be deemed a separate legal entity until sufficient reason to the contrary
appears. But the rule is not absolute. A corporations separate and distinct legal personality may be disregarded
and the veil of corporate fiction pierced when the notion of legal entity is used to defeat public convenience,
justify wrong, protect fraud, or defend crime.
In this case, Cupertino presented overwhelming evidence that petitioner and its affiliate corporations had
received the proceeds of the P160,000,000.00 loan increase which was then made the consideration for the
Amended Real Estate Mortgage. Quoting the the RTCs and the CAs disquisitions on this matter:
xxxx
 
The conjunction of the identity of the [petitioner] corporation in relation to Siain
Transport, Inc. (Siain Transport), Yuyek Manufacturing Corp. (Yuyek), as well as the
individual personalities of Cua Leleng and Alberto Lim has been indubitably shown in
the instant case by the following established considerations, to wit:
 
1.  Siain and Yuyek have [a] common set of [incorporators],
stockholders and board of directors;
 
2.  They have the same internal bookkeeper and accountant in the
person of Rosemarie Ragodon;
 
3. They have the same office address at 306 Jose Rizal
St.,  Mandaluyong City;
 
4. They have the same majority stockholder and president in the
person of Cua Le Leng; and
 
5. In relation to Siain Transport, Cua Le Leng had the unlimited
authority by and on herself, without authority from the Board of
Directors, to use the funds of Siain Trucking to pay the obligation
incurred by the [petitioner] corporation.
Thus, while it appears that the issuance of the checks and the debit memos as well as the
pledges of the condominium units, the jewelries, and the trucks had occurred prior to
March 2, 1995, the date when Cupertino was incorporated, the same does not affect the
validity of the subject transactions because applying again the principle of piercing the
corporate veil, the transactions entered into by Cupertino Realty Corporation, it being
merely the alter ego of Wilfredo Lua, are deemed to be the latters personal transactions
and vice-versa.
x x x Firstly. As can be viewed from the extant record of the instant case, Cua Leleng is
the majority stockholder of the three (3) corporations namely, Yuyek Manufacturing
Corporation, Siain Transport, Inc., and Siain Enterprises Inc., at the same time the
President thereof. Second. Being the majority stockholder and the president, Cua Le leng
has the unlimited power, control and authority without the approval from the board of
directors to obtain for and in behalf of the [petitioner] corporation from [Cupertino]
thereby mortgaging her jewelries, the condominiums of her common law husband,
Alberto Lim, the trucks registered in the name of [petitioner] corporations sister
company, Siain Transport Inc., the subject lots registered in the name of [petitioner]
corporation and her oil mill property at Iloilo City. And, to apply the proceeds thereof in
whatever way she wants, to the prejudice of the public.
 
Hence, Petition is DENIED.
____________________________________________________________________________________
4. General Credit vs. Alsons Devt.
G.R. No. 154975 January 29, 2007
Chua
Doctrine:
on at least three (3) basic areas where piercing the veil, with which the law covers and isolates the corporation
from any other legal entity to which it may be related, is allowed. These are: 1) defeat of public convenience, as
when the corporate fiction is used as vehicle for the eva-sion of an existing obligation; 2) fraud cases or when
the corporate en-tity is used to justify a wrong, protect fraud, or defend a crime; or 3) alter ego cases, where a
corporation is merely a farce since it is a 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.
Name of the parties:
Petitioner: GENERAL CREDIT CORPORATION (now PENTA CAPITAL FINANCE
CORPORATION)
Respondents: ALSONS DEVELOPMENT and INVESTMENT CORPORATION and CCC EQUITY
CORPORATION
Applicable Law:
Facts:
1. General Credit Corporation (GCC, for short), then known as Commercial Credit Corporation (CCC),
established CCC franchise companies in different urban centers of the country.
2. In furtherance of its business, GCC had, as early as 1974, applied for and was able to secure license from
the then Central Bank (CB) of the Philippines and the Securities and Exchange Commission (SEC) to
engage also in quasi-banking activities
3. CCC Equity Corporation (EQUITY, for brevity) was organized in November 1994 by GCC for the
purpose of, among other things, taking over the operations and management of the various franchise
companies.
4. ALSONS and the Alcantara family, which the latter eventually assigned their share to the former, for a
consideration of Two Million (P2,000,000.00) Pesos, sold their shareholdings a total of 101,953 shares,
more or less in the CCC franchise companies to EQUITY.
5. Wilfredo Labayen, president of EQUITY, pleaded inability to pay the stipulated interest as EQUITY no
longer then having assets or property to settle its obligation nor being extended financial support by GCC.
Contention of ALSON et al
1. GCC is being impleaded as party-defendant for any judgment ALSONS might secure against EQUITY
and, under the doctrine of piercing the veil of corporate fiction, against GCC, EQUITY having been
organized as a tool and mere conduit of GCC.
2. EQUITY was purposely organized by GCC for the latter to avoid CB Rules and Regulations on DOSRI
(Directors, Officers, Stockholders and Related Interest) limitations, and that it acted merely as
intermediary or bridge for loan transactions and other dealings of GCC to its franchises and the investing
public
3. EQUITY is solely dependent upon GCC for its funding requirements, to settle, among others, equity
purchases made by investors on the franchises; hence, GCC is solely and directly liable to ALSONS, the
former having failed to provide EQUITY the necessary funds to meet its obligations to ALSONS.
Contention of GCC
1. GCC is a distinct and separate entity from EQUITY and alleging, in essence that the business
relationships with each other were always at arms length.
Ruling of the lower court:
RTC: Found that EQUITY was but an instrumentality or adjunct of GCC and considering the legal
consequences and implications of such relationship.
CA: Affirmed the decision
Issue:
1. Whether there is absolutely no basis for piercing the veil of corporate fiction - No
Ruling:
a. Basis of the ruling: Authorities are agreed on at least three (3) basic areas where piercing the veil,
with which the law covers and isolates the corporation from any other legal entity to which it may
be related, is allowed.[These are: 1) defeat of public convenience, as when the corporate fiction is
used as vehicle for the evasion of an existing obligation; 2) fraud cases or when the corporate
entity is used to justify a wrong, protect fraud, or defend a crime; or 3) alter ego cases, where a
corporation is merely a farce since it is a 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.
b. Application of ruling: Per the Courts count, the trial court enumerated no less than 20 documented
circumstances and transactions, which, taken as a package, indeed strongly supported the
conclusion that respondent EQUITY was but an adjunct, an instrumentality or business conduit of
petitioner GCC. This relation, in turn, provides a justifying ground to pierce petitioners corporate
existence as to ALSONS claim in question. Foremost of what the trial court referred to as certain
circumstances are the commonality of directors, officers and stockholders and even sharing of
office between petitioner GCC and respondent EQUITY; certain financing and management
arrangements between the two, allowing the petitioner to handle the funds of the latter; the virtual
domination if not control wielded by the petitioner over the finances, business policies and
practices of respondent EQUITY; and the establishment of respondent EQUITY by the petitioner
to circumvent CB rules.
Not only did GCC cause the incorporation of EQUITY, but, the latter had grossly inadequate
capital for the pursuit of its line of business to the extent that its business affairs were considered
as GCCs own business endeavors.
c. Justified to pierce the veil of corporate entity and disregard the separate existence of the percent
and subsidiary the latter having been so controlled by the parent that its separate identity is hardly
discernible thus becoming a mere instrumentality or alter ego of the former. Consequently, as the
parent corporation, GCC maybe held responsible for the acts and contracts of its subsidiary
EQUITY - most especially if the latter (who had anyhow acknowledged its liability to ALSONS)
maybe without sufficient property with which to settle its obligations. For, after all, GCC was the
entity which initiated and benefited immensely from the fraudulent scheme perpetrated in
violation of the law.
Disposition: Resolution appealed is REAFFIRMED
5. Concept Builders v. NLRC
G.R. No. 108734 (1996)
Digest Author: Princess Cariño
Petitioner: Concept Builders, Inc.
Respondents: THE NATIONAL LABOR RELATIONS COMMISSION, (First Division) and Norberto
Marabe, Rodolfo Raquel, Cristobal Riego, Manuel Gillego, Palcronio Giducos, Pedro Aboigar, Norberto
Comendador, Rogelio Salut, Emilio Garcia, Jr., Mariano Rio, Paulina Basea, Alfredo Albera, Paquito Salut,
Domingo Guarino, Romeo Galve, Dominador Sabina, Felipe Radiana, Gavino Sualibio, Moreno Escares,
Ferdinand Torres, Felipe Basilan, and Ruben Robalos, respondents.
Doctrine:
 Where a sister corporation is used as a shield to evade a corporation’s subsidiary liability for damages,
the corporation may not be heard to say that it has a personality separate and distinct from the other
corporation.
FACTS:
 Concept Builders, Inc., a domestic corporation, engaged in the construction business. Private respondents
were employed by said company as laborers, carpenters and riggers.
 Private respondents were served individual written notices of termination of employment by petitioner.
(Their contracts of employment had expired and the project in which they were hired had been completed)
 NLRC found that at the time of the termination of private respondents’ employment, the project in which
they were hired had not yet been finished and completed. Petitioner had to engage the services of sub-
contractors whose workers performed the functions of private respondents.
 Aggrieved, private respondents filed a complaint for illegal dismissal, unfair labor practice and non-
payment of their legal holiday pay, overtime pay and thirteenth-month pay against petitioner.
Ruling of Lower Courts:
1. Labor Arbiter (1st decision) reinstatement of private respondents with back wages
 Petitioner moved to NLRC but was dismissed (decision of LA has become final and executory)
  Only partial satisfactory of monetary claims (garnishment of sums from petitioner’s debtor,
MWSA)
 Second writ of execution was still a failure (petitioner’s premises were, allegedly, no longer
occupied by petitioner but of the Hydro Pipes Philippines, Inc. (HPPI) and the special sheriff
was prevented by the security guards)
 Special sheriff then recommended that a “break-open order” be issued to enable him to proceed
with the auction sale of the petitioner’s personal property to satisfy the LA’s judgment.
 VP of HPPI (Dennis Cuyegkeng) filed a third-party claim with LA alleging that the property
sought to be levied by the sheriff were owned by HPPI.
 Private respondents alleged that HPPI and petitioner were owned by the same
incorporator/stokeholders. They also alleged that petitioner temporarily suspended its business
operations in order to evade its legal obligations to them. In support of their claim against
HPPI, they presented duly certified copies of the General Informations Sheet submitted by
petitioner and by HPPI to the SEC. (both HPPI and petitioner have the same set of
stockholders and officers)
 HPPI invoked the separate juridical identity doctrine stating that it engaged in a manufacturing
while the petitioner engaged in construction.
2. Labor Arbiter (2nd decision)
 Denied private respondents motion for break-open oder
3. NLRC set aside LA’s order.
 issued “break-open order” against the premises of Concept Builder’s sister company.
Contentions of the PETITIONER (Concept Builders):
1. The doctrine of piercing the corporate veil should not have been applied in the absence of any showing
that it created HPPI in order to evade its liability to private respondents.
2. It also contends that HPPI is engaged in the manufacture and sale of steel, concrete and iron pipes, a
business which is distinct and separate from petitioner’s construction business. Hence, it is of no
consequence that petitioner and HPPI shared the same premises, the same President and the same set of
officers and subscribers.
ISSUE: Whether the doctrine of piercing the corporate veil should be applied. – YES.
RULING: Petitioner’s veil should be pierce
General Rule:
 A corporation is an entity separate and distinct 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.
Exception:
 So, 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 the labor laws, this separate personality of
the corporation may be disregarded or the veil of corporate fiction pierced. This is true likewise when
the corporation is merely an adjunct, a business conduit or an alter ego of another corporation.
IN THIS CASE:
 Same business address; Information Sheets filed by same person; same President; same BOD; same
corporate officers and same subscribers
 While petitioner claimed that it ceased its business operations, it filed an Information Sheet with
SEC stating that its office address is at 355 Maysan Road, Valenzuela, Metro Manila. On the other
hand, HPPI, the third-party claimant, submitted on the same day, a similar information sheet stating
that its office address is at 355 Maysan Road, Valenzuela, Metro Manila.
 Clearly, petitioner ceased its business operations in order to evade the payment to private respondents of
back wages and to bar their reinstatement to their former positions. HPPI is obviously a business conduit
of petitioner corporation and its emergence was skillfully orchestrated to avoid the financial liability that
already attached to petitioner corporation.
 In view of the failure of the sheriff to effect a levy upon the property subject of the execution, private
respondents had no other recourse but to apply for a break-open order after the third-party claim of HPPI
was dismissed for lack of merit by the NLRC, pursuant to Sec. 3, Rule VII of the NLRC Manual of
Execution of Judgment which provides for the execution of break-open order.
Disposition
WHEREFORE, the petition is DISMISSED and the assailed resolutions of the NLRC, dated April 23, 1992 and
December 3, 1992, are AFFIRMED.
SO ORDERED.
IMPORTANT CONCEPTS
1. No accurate rule to apply the piercing doctrine
 The conditions under which the juridical entity may be disregarded vary according to the peculiar
facts and circumstances of each case. No hard and fast rule can be accurately laid down.
 Some probative factors of identity that will justify the application of the doctrine of piercing the
corporate veil:
1. Stock ownership by one or common ownership of both corporations;
2. Identity of directors and officers;
3. The manner of keeping corporate books and records; and
4. Methods of conducting the business.
2. Instrumentality Rule
 The SEC en banc explained the “instrumentality rule” which the courts have applied in disregarding
the separate juridical personality of corporations as follows:
“Where one corporation is so organized and controlled and its affairs are conducted so that
it is, in fact, a mere instrumentality or adjunct of the other, the fiction of the corporate entity
of the ‘instrumentality’ may be disregarded. The control necessary to invoke the rule is not
majority or even complete stock control but such domination of finances, policies and
practices that the controlled corporation has, so to speak, no separate mind, will or
existence of its own, and is but a conduit for its principal. It must be kept in mind that the
control must be shown to have been exercised at the time the acts complained of took place.
Moreover, the control and breach of duty must proximately cause the injury or unjust loss
for which the complaint is made.”
3. Tests in determining Applicability of the Piercing Doctrine:
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
plaintiff’s legal rights; and
3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss
complained of.
 The absence of any one of these elements prevents ‘piercing the corporate veil.’ In applying
the ‘instrumentality’ or ‘alter ego’ doctrine, the courts are concerned with reality and not
form, with how the corporation operated and the individual defendant’s relationship to that
operation.
 Thus, the question of whether a corporation is a mere alter ego, a mere sheet or paper
corporation, a sham or a subterfuge is purely one of fact.
____________________________________________________________________
6. Republic vs. Mega Pacific
G.R. No. 184666. June 27, 2016.*
Digest Author: Bulacan
 
Petitioner: REPUBLIC OF THE PHILIPPINES
Respondents: MEGA PACIFIC ESOLUTIONS, INC., WILLY U. YU, BONNIE S. YU, ENRIQUE T.
TANSIPEK, ROSITA Y. TANSIPEK, PEDRO O. TAN, JOHNSON W. FONG, BERNARD I. FONG,
and LAURIANO** A. BARRIOS
DOCTRINE:
Veil-piercing in fraud cases requires that the legal fiction of separate juridical personality is used for
fraudulent or wrongful ends.
We see red flags of fraudulent schemes in public procurement, all of which were established in the 2004
Decision, the totality of which strongly indicate that MPEI was a sham corporation formed merely for the
purpose of perpetrating a fraudulent scheme. The red flags are as follows: (1) overly narrow
specifications; (2) unjustified recommendations and unjustified winning bidders; (3) failure to meet the
terms of the contract; and (4) shell or fictitious company.
Fictitious companies are by definition fraudulent and may also serve as fronts for government officials.
The typical scheme involves corrupt government officials creating a fictitious company that will serve as
a “vehicle” to secure contract awards. Often, the fictitious — or ghost — company will subcontract work
to lower cost and sometimes unqualified firms. The fictitious company may also utilize designated losers
as subcontractors to deliver the work, thus indicating collusion.
Shell companies have no significant assets, staff or operational capacity. They pose a serious red flag as a
bidder on public contracts, because they often hide the interests of project or government officials,
concealing a conflict of interest and opportunities for money laundering. Also, by definition, they have no
experience.
  
The main effect of disregarding the corporate fiction is that stockholders will be held personally liable for
the acts and contracts of the corporation, whose existence, at least for the purpose of the particular
situation involved, is ignored.
We have consistently held that when the 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 of persons. 
OVERVIEW:
The instant case is an offshoot of this Court’s Decision dated 13 January 2004 (2004 Decision) in a related case
entitled Information Technology Foundation of the Philippines v. Commission on Elections.
 In the 2004 case, the Court declared void the automation contract executed by respondent Mega Pacific
eSolutions, Inc. (MPEI) and the Commission on Elections (COMELEC) for the supply of automated
counting machines (ACMs) for the 2004 national elections.
 The present case involves the attempt of petitioner Republic of the Philippines to cause the attachment of
the properties owned by respondent MPEI, as well as by its incorporators and stockholders (individual
respondents in this case), in order to secure petitioner’s interest and to ensure recovery of the payments it
made to respondents for the invalidated automation contract.
 At bench is a Rule 45 Petition assailing the Amended Decision issued by CA directing the remand of the
case to the RTC for the reception of evidence in relation to petitioner’s application for the issuance of a
writ of preliminary attachment.
 FACTS:
 Republic Act No. 8436 authorized the COMELEC to use an automated election system for the May 1998
elections.
 For the 2004 elections, the COMELEC invited bidders to apply for the procurement of supplies,
equipment, and services.
 Respondent MPEI, as lead company, purportedly formed a joint venture — known as the Mega Pacific
Consortium (MPC) — together with We Solv, SK C & C, ePLDT, Election.com and Oracle.
Subsequently, MPEI, on behalf of MPC, submitted its bid proposal to COMELEC.
 MPC won the bid.
 Despite the award to MPC, the COMELEC and MPEI executed Automated Counting and Canvassing
Project Contract.
 Pursuant to the automation contract, MPEI delivered 1,991 ACMs to the COMELEC. The latter, for its
part, made partial payments to MPEI in the aggregate amount of P1.05 billion.
 The full implementation of the automation contract was rendered impossible by the fact that, the SC
Court in its 2004 Decision declared the contract null and void.
 Upon the finality of the declaration of nullity of the automation contract, respondent MPEI filed a
Complaint for Damages before the RTC Makati, arguing that, notwithstanding the nullification of the
automation contract, the COMELEC was still bound to pay the amount of P200,165,681.89.
 Petitioner filed its Answer with Counterclaim and argued that respondent MPEI could no longer recover
the unpaid balance from the void automation contract.
 Petitioner demanded the return of the payments made pursuant to the automation contract. It argued that
individual respondents, being the incorporators of MPEI, likewise ought to be impleaded and held
accountable for MPEI’s liabilities. The creation of MPC was, after all, merely an ingenious scheme to
feign eligibility to bid.
 Petitioner prayed for the issuance of a writ of preliminary attachment against the properties of MPEI and
individual respondents.
The application was grounded upon the fraudulent misrepresentation of respondents as to their eligibility to
participate in the bidding for the COMELEC automation project and the failure of the ACMs to comply with
mandatory technical requirements.
RTC RULING:
Denied the prayer for the issuance of a writ of preliminary attachment, ruling that there was an absence of
factual allegations as to how the fraud was actually committed.
The allegations of fraud were not supported by the COMELEC, the office in charge of conducting the bidding
for the election automation contract. There was no evidence that MPEI’s corporate fiction was used to
perpetrate fraud.
CA RULING: 
Reversed and set aside the trial court’s Orders and ruled that there was sufficient basis for the issuance of a writ
of attachment in favor of petitioner.
But, upon review, the CA reconsidered its First Decision and directed the remand of the case to the RTC Makati
for the reception of evidence of allegations of fraud and to determine whether attachment should necessarily
issue.
The CA explained in its Amended Decision that respondents could not be considered to have fostered a
fraudulent intent to dishonor their obligation, since they had delivered 1,991 units of ACMs. It directed
petitioner to present proof of respondents’ intent to defraud COMELEC during the execution of the automation
contract.
Proof must likewise be adduced to verify the requisite fraud that would justify the piercing of the corporate veil
of respondent MPEI.
PETITIONER’S CONTENTION:
1. Respondents allegedly committed fraud by securing the automation contract, although MPEI was not
qualified to bid in the first place.
2. Their claim that the members of MPC bound themselves to the automation contract was an indication of
bad faith as the contract was executed by MPEI alone.Neither could they deny that the software
submitted during the bidding process was not the same one that would be used on election day.
3.  They could not dissociate themselves from telltale signs such as purportedly supplying software that
later turned out to be nonexistent.
ISSUE: Whether petitioner has sufficiently established fraud on the part of respondents to justify the issuance
of a writ of preliminary attachment in its favor--YES
RATION+ RULING:
A writ of preliminary attachment should issue in favor of petitioner over the properties of respondents MPEI,
Willy Yu (Willy) and the remaining individual respondents. 2 of the basis are:
1. Fraud on the part of respondent MPEI was sufficiently established by the factual findings of this Court in its
2004 Decision and subsequent pronouncements.
2. A writ of preliminary attachment may issue over the properties of the individual respondents using the
doctrine of piercing the corporate veil.
1. Fraud on the part of respondent MPEI was sufficiently established by the factual findings of this Court
in its 2004 Decision and subsequent pronouncements.
To sustain an attachment, it must be shown that the debtor in contracting the debt or incurring the obligation
intended to defraud the creditor. The fraud must relate to the execution of the agreement and must have been the
reason which induced the other party into giving consent which he would not have otherwise given. 

In the case at bar, petitioner has sufficiently discharged the burden of demonstrating the commission of fraud by
respondent MPEI in the execution of the automation contract in the two ways that were enumerated earlier and
discussed below:
A. Respondent MPEI had perpetrated a scheme against petitioner to secure the automation contract by using
MPC as supposed bidder and eventually succeeding in signing the automation contract as MPEI alone, an entity
which was ineligible to bid in the first place.
Respondents in the 2004 case insist:
That the bidder was not MPE but was MPC, of which MPEI was but a part. As proof thereof, they point to the
March 7, 2003 letter of intent to bid, signed by the president of MPEI allegedly for and on behalf of MPC.
SC does not agree. The March 7, 2003 letter, signed by only one signatory — “Willy U. Yu, President, Mega
Pacific eSolutions, Inc., (Lead Company/Proponent) For: Mega Pacific Consortium” — and without any further
proof, does not by itself prove the existence of the consortium. It does not show that MPEI or its president have
been duly pre-authorized by the other members of the putative consortium to represent them, to bid on their
collective behalf and, more important, to commit them jointly and severally to the bid undertakings.
In the case of a consortium or joint venture desirous of participating in the bidding, it goes without saying that
the Eligibility Envelope would necessarily have to include a copy of the joint venture agreement, the
consortium agreement or memorandum of agreement — or a business plan or some other instrument of similar
import — establishing the due existence, composition and scope of such aggrupation. 
In the instant case, no such instrument was submitted to Comelec. It thus follows that, prior the award of the
Contract, no consortium had actually been formed. Hence, had the proponent MPEI been evaluated based solely
on its own experience, financial and operational track record or lack thereof, it would surely not have qualified
and would have been immediately considered ineligible to bid, as respondents readily admit.
MPEI committed fraud by securing the election automation contract; and, in order to perpetrate the fraud, by
misrepresenting that the actual bidder was MPC and not MPEI, which was only acting on behalf of MPC. We
likewise rule that respondent MPEI has defrauded petitioner, since the former still executed the automation
contract despite knowing that it was not qualified to bid for the same.
MPEI was not even eligible and qualified to bid in the first place; and yet, the automation contract itself was
executed and signed singly by respondent MPEI, not on behalf of the purported bidder MPC, without any
mention whatsoever of the members of the supposed consortium.
From these established facts, We can surmise that in order to secure the automation contract, respondent MPEI
perpetrated a scheme against petitioner by using MPC as supposed bidder and eventually succeeding in signing
the automation contract as MPEI alone. Worse, it was respondent MPEI alone, an entity that was ineligible to
bid in the first place, that eventually executed the automation contract.
2. A writ of preliminary attachment may issue over the properties of the individual respondents using the
doctrine of piercing the corporate veil.
Petitioner seeks the issuance of a writ of preliminary attachment over the personal assets of the individual
respondents, notwithstanding the doctrine of separate juridical personality. It invokes the use of the doctrine of
piercing the corporate veil, to which the canon of separate juridical personality is vulnerable, as a way to reach
the personal properties of the individual respondents.
Petitioner paints a picture of a sham corporation set up by all the individual respondents for the purpose of
securing the automation contract.
We agree with petitioner.
Veil-piercing in fraud cases requires that the legal fiction of separate juridical personality is used for fraudulent
or wrongful ends.1 For reasons discussed below, We see red flags of fraudulent schemes in public procurement,
all of which were established in the 2004 Decision, the totality of which strongly indicate that MPEI was a
sham corporation formed merely for the purpose of perpetrating a fraudulent scheme.
The red flags are as follows: (1) overly narrow specifications; (2) unjustified recommendations and unjustified
winning bidders; (3) failure to meet the terms of the contract; and (4) shell or fictitious company.
The Handbook regards a shell or fictitious company as a “serious red flag,” a concept that it elaborates upon
Fictitious companies are by definition fraudulent and may also serve as fronts for government officials. The
typical scheme involves corrupt government officials creating a fictitious company that will serve as a “vehicle”
to secure contract awards. Often, the fictitious — or ghost — company will subcontract work to lower cost and
sometimes unqualified firms. The fictitious company may also utilize designated losers as subcontractors to
deliver the work, thus indicating collusion.
Shell companies have no significant assets, staff or operational capacity. They pose a serious red flag as a
bidder on public contracts, because they often hide the interests of project or government officials,
concealing a conflict of interest and opportunities for money laundering. Also, by definition, they have no
experience.
MPEI qualifies as a shell or fictitious company. It was nonexistent at the time of the invitation to bid; to be
precise, it was incorporated only 11 days before the bidding. It was a newly formed corporation and, as such,
had no track record to speak of.
Further, MPEI misrepresented itself in the bidding process as “lead company” of the supposed joint venture.
The misrepresentation appears to have been an attempt to justify its lack of experience. As a new company, it
was not eligible to participate as a bidder. It could do so only by pretending that it was acting as an agent of the
putative consortium.
The timing of the incorporation of MPEI is particularly noteworthy. Its close nexus to the date of the invitation
to bid and the date of the bidding (11 days) provides a strong indicium of the intent to use the corporate vehicle
for fraudulent purposes. This proximity unmistakably indicates that the automation contract served as
motivation for the formation of MPEI: a corporation had to be organized so it could participate in the bidding
by claiming to be an agent of a pretended joint venture.
The totality of the red flags found in this case leads Us to the inevitable conclusion that MPEI was nothing but a
sham corporation formed for the purpose of defrauding petitioner. Its ultimate objective was to secure the
P1,248,949,088 automation contract.
The scheme was to put up a corporation that would participate in the bid and enter into a contract with the
COMELEC, even if the former was not qualified or authorized to do so.
Without the incorporation of MPEI, the defraudation of the government would not have been possible. The
formation of MPEI paved the way for its participation in the bid, through its claim that it was an agent of a
supposed joint venture, its misrepresentations to secure the automation contract, its misrepresentation at the
time of the execution of the contract, its delivery of the defective ACMs, and ultimately its acceptance of the
benefits under the automation contract.
The foregoing considered, veil-piercing is justified in this case.
[Whose assets shall be reached by the application of the piercing doctrine]
All the individual respondents actively participated in the perpetration of the fraud
against petitioner, their personal assets may be subject to a writ of preliminary attachment by piercing
the corporate veil.
 A corporation’s privilege of being treated as an entity distinct and separate from the stockholders is confined to
legitimate uses, and is subject to equitable limitations to prevent its being exercised for fraudulent, unfair, or
illegal purposes.
The main effect of disregarding the corporate fiction is that stockholders will be held personally liable for
the acts and contracts of the corporation, whose existence, at least for the purpose of the particular
situation involved, is ignored.
We have consistently held that when the 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 of persons.
Thus, considering that We find it justified to pierce the corporate veil in the case before Us, MPEI must,
perforce, be treated as a mere association of persons whose assets are unshielded by corporate fiction. Such
persons’ individual liability shall now be determined with respect to the matter at hand.
It is clear to this Court that inequity would result if We do not attach personal liability to all the individual
respondents. With a definite finding that MPEI was used to perpetrate the fraud against the government, it
would be a great injustice if the remaining individual respondents would enjoy the benefits of incorporation
despite a clear finding of abuse of the corporate vehicle. Indeed, to allow the corporate fiction to remain intact
would not subserve, but instead subvert, the ends of justice.
_______________________________________________________________________
7. Lipat v. Pacific Banking Corporation - Bernal
Doctrine: Where one corporation is so organized and controlled and its affairs are conducted so that it is,
in fact, a mere instrumentality or adjunct of the other, the fiction of the corporate entity of the
instrumentality may be disregarded. The control necessary to invoke the rule is not majority or even
complete stock control but such domination of finances, policies and practices that the controlled
corporation has, so to speak, no separate mind, will or existence of its own, and is but a conduit for its
principal.
 Petitioners, the spouses Alfredo Lipat and Estelita Burgos Lipat, owned Belas Export Trading
(BET), a single proprietorship with principal office at Quezon City. BET was engaged in the
manufacture of garments for domestic and foreign consumption. The Lipats also owned the Mystical
Fashions in the United States, which sells goods imported from the Philippines through BET. Mrs.
Lipat designated her daughter, Teresita B. Lipat, to manage BET in the Philippines while she was
managing Mystical Fashions in the United States.
 In order to facilitate the convenient operation of BET, Estelita Lipat executed a special power of
attorney appointing Teresita Lipat as her attorney-in-fact to obtain loans and other credit
accommodations from respondent Pacific Banking Corporation (Pacific Bank). She likewise
authorized Teresita to execute mortgage contracts on properties owned or co-owned by her as
security for the obligations to be extended by Pacific Bank including any extension or renewal
thereof.
 Teresita, by virtue of the special power of attorney, was able to secure for and in behalf of her
mother, Mrs. Lipat and BET, a loan from Pacific Bank amounting to buy fabrics to be manufactured
by BET and exported to Mystical Fashions in the United States. As security therefor Teresita
executed a Real Estate Mortgage over their property located at Quezon City. 
 BET later on was incorporated into a family corporation named Belas Export Corporation (BEC) in
order to facilitate the management of the business. BEC was engaged in the business of
manufacturing and exportation of all kinds of garments of whatever kind and description and utilized
the same machineries and equipment previously used by BET. Its incorporators and directors
included the Lipat spouses who owned a combined 300 shares out of the 420 shares subscribed,
Teresita Lipat who owned 20 shares, and other close relatives and friends of the Lipats. Estelita
Lipat was named president of BEC, while Teresita became the vice-president and general manager.
 Eventually, the loan was later restructured in the name of BEC and subsequent loans were obtained
by BEC with the corresponding promissory notes duly executed by Teresita on behalf of the
corporation. A letter of credit was also opened by Pacific Bank in favor of A. O. Knitting
Manufacturing Co., Inc., upon the request of BEC after BEC executed the corresponding trust
receipt therefor. Export bills were also executed in favor of Pacific Bank for additional
finances. These transactions were all secured by the real estate mortgage over the Lipats property.
 BEC defaulted in its payment. , Estelita Lipat requested for additional time but failed to fulfil her
promise.
 The spouses Lipat filed before the Quezon City RTC a complaint for annulment of the real estate
mortgage, extrajudicial foreclosure and the certificate of sale issued over the property against Pacific
Bank and Eugenio D. Trinidad. They allege that the promissory notes, trust receipt, and export bills
were all ultra vires acts of Teresita as they were executed without the requisite board resolution of
the Board of Directors of BEC. The Lipats also averred that assuming said acts were valid and
binding on BEC, the same were the corporations sole obligation, it having a personality distinct and
separate from spouses Lipat.
 RTC ruled in favour if Pacific Banking Corp The trial court ruled that there was convincing and
conclusive evidence proving that BEC was a family corporation of the Lipats. As such, it was a mere
extension of petitioners personality and business and a mere alter ego or business conduit of the
Lipats established for their own benefit. Hence, to allow petitioners to invoke the theory of separate
corporate personality would sanction its use as a shield to further an end subversive of justice. Thus,
the trial court pierced the veil of corporate fiction and held that Belas Export Corporation and
petitioners (Lipats) are one and the same. Pacific Bank had transacted business with both BET and
BEC on the supposition that both are one and the same. Hence, the Lipats were estopped from
disclaiming any obligations on the theory of separate personality of corporations, which is contrary
to principles of reason and good faith.
 CA dismissed the appeal and denied the motion for reconsideration of the Spouses Lipat.
Issue: WON THE DOCTRINE OF PIERCING THE VEIL OF CORPORATE FICTION APPLIES
IN THIS CASE.
RULING:
On the first issue, petitioners contend that both the appellate and trial courts erred in holding them liable for the
obligations incurred by BEC through the application of the doctrine of piercing the veil of corporate fiction
absent any clear showing of fraud on their part.
Respondents counter that there is clear and convincing evidence to show fraud on part of petitioners
given the findings of the trial court, as affirmed by the Court of Appeals, that BEC was organized as a business
conduit for the benefit of petitioners.
Petitioners contentions fail to persuade this Court. A careful reading of the judgment of the RTC and the
resolution of the appellate court show that in finding petitioners mortgaged property liable for the obligations of
BEC, both courts below relied upon the alter ego doctrine or instrumentality rule, rather than fraud in piercing
the veil of corporate fiction. When the corporation is the mere alter ego or business conduit of a person, the
separate personality of the corporation may be disregarded. This is commonly referred to as the instrumentality
rule or the alter ego doctrine, which the courts have applied in disregarding the separate juridical personality of
corporations. As held in one case,
Where one corporation is so organized and controlled and its affairs are conducted so that it is, in fact, a mere
instrumentality or adjunct of the other, the fiction of the corporate entity of the instrumentality may be
disregarded. The control necessary to invoke the rule is not majority or even complete stock control but such
domination of finances, policies and practices that the controlled corporation has, so to speak, no separate
mind, will or existence of its own, and is but a conduit for its principal. xxx
We find that the evidence on record demolishes, rather than buttresses, petitioners contention that BET
and BEC are separate business entities. Note that Estelita Lipat admitted that she and her husband, Alfredo,
were the owners of BET and were two of the incorporators and majority stockholders of BEC. It is also
undisputed that Estelita Lipat executed a special power of attorney in favor of her daughter, Teresita, to obtain
loans and credit lines from Pacific Bank on her behalf. Incidentally, Teresita was designated as executive-vice
president and general manager of both BET and BEC, respectively. We note further that: (1) Estelita and
Alfredo Lipat are the owners and majority shareholders of BET and BEC, respectively; (2) both firms were
managed by their daughter, Teresita; (3) both firms were engaged in the garment business, supplying products
to Mystical Fashion, a U.S. firm established by Estelita Lipat; (4) both firms held office in the same building
owned by the Lipats; (5) BEC is a family corporation with the Lipats as its majority stockholders; (6) the
business operations of the BEC were so merged with those of Mrs. Lipat such that they were practically
indistinguishable; (7) the corporate funds were held by Estelita Lipat and the corporation itself had no visible
assets; (8) the board of directors of BEC was composed of the Burgos and Lipat family members; (9) Estelita
had full control over the activities of and decided business matters of the corporation; and that (10) Estelita
Lipat had benefited from the loans secured from Pacific Bank to finance her business abroad and from the
export bills secured by BEC for the account of Mystical Fashion. It could not have been coincidental that BET
and BEC are so intertwined with each other in terms of ownership, business purpose, and
management.Apparently, BET and BEC are one and the same and the latter is a conduit of and merely
succeeded the former. Petitioners attempt to isolate themselves from and hide behind the corporate
personality of BEC so as to evade their liabilities to Pacific Bank is precisely what the classical doctrine of
piercing the veil of corporate entity seeks to prevent and remedy. In our view, BEC is a mere continuation and
successor of BET, and petitioners cannot evade their obligations in the 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 rule that the Court of Appeals did not err when it applied the instrumentality doctrine in piercing
the corporate veil of BEC.

_______________________________________________________________________
8. RAMIREZ TELEPHONE v. BANK OF AMERICA
G.R. No. L-22614, 29 SCRA 191, 29 August 1969
Case Digest: Barredo
Petitioner: Ramirez Telephone Corporation
Respondents: Bank of America, E.F. Herbosa, The Sheriff of Manila, and the Court of Appeals
DOCTRINE: Mixing of personal accounts with corporate bank deposit accounts would authorize piercing to
protect the judgment claim of a creditor.
FACTS:
 Respondent E.F. Herbosa is the owner of a building in Sta. Mesa which he leased to Ruben R. Ramirez,
president of Ramirez Telephone Corporation.
 Due to Ramirez‘s failure to pay rent, Herbosa filed an ejectment suit against Ramirez.
 Herbosa was able to get a favorable decision, and on the eve of the promulgation of the judgment in his
favor, the Sheriff of Manila sent a letter notifying respondent Bank of America that levy is made upon all
the goods, effects, interests, credits, money, stocks, shares, any interests in stocks and shares and all debts
owing by the bank to Ramirez.
 Respondent bank wrote back saying that it does not hold any fund in the name of Ruben R. Ramirez;
however, it holds the amount of P2,400.00 in the name of Ramirez Telephone.
 The following day, however, Ramirez Telephone withdrew the sum of P1,500.00 leaving a balance of
nothing more than P889.00.
 When Ramirez Telephone, through Ruben R. Ramirez, issued a check in the amount of P2,320.00 in favor
of Ray Electronics for payment of certain equipment sold by the latter, said check was dishonored by
respondent bank prompting the lawyer of Ramirez Telephone to file an action against the bank.
 Respondent bank said that Ramirez Telephone should first obtain a release from the civil case against
Ruben R. Ramirez.
CONTENTION OF PETITIONER:
 Its personality as an entity separate and distinct from its major stockholders, Ruben R. Ramirez and his
wife, is not to be disregarded even if they own 75% of the stock of the corporation; therefore, its funds as a
corporation cannot be garnished to satisfy the debts of its principal stockholders.
RULING OF THE LOWER COURTS:
 CFI – ruled in favor of petitioner. Ramirez Telephone Corporation is entirely a distinct and separate entity
from Ruben Ramirez and his wife even though they own 75% of the stock of the corporation.
 CA – reversed RTC decision.
ISSUE: Whether the funds of petitioner Ramirez Telephone Corporation may be garnished to satisfy the
personal debts of Ruben Ramirez and his wife who are the corporation’s principal stockholders. – YES.
RULING + RATIO:
The general rule is that "the corporate entity will not be disregarded no matter how large the holding a
particular stockholder may have in the corporation;" however, there are exceptions. In appropriate cases, the
veil of corporate fiction may be pierced. Mixing of personal accounts with corporate bank deposit accounts
would authorize piercing to protect the judgment claim of a creditor. "Even with regard to corporations duly
organized and existing under the law, we have in many a case pierced the veil of corporate fiction to administer
the ends of justice." From the facts as found, this is such a case. CA decision affirmed.
Disclaimer: Facts of the case is in Spanish so I just used google translate as well as copied from another case
digest that did the same. The ruling is really that short in the actual case. 
9. Land Bank of the Philippines v. CA (Nakabold face and underscore yung dinagdag ko)
G.R. No. 127181, September 4, 2001
Digest Author: Agorilla
Petitioner/s: Land Bank of the Philippines
Respondent/s: The Court of Appeals, Eco Management Corporation and Emmanuel C. Oñate
Doctrine:
A corporation, upon coming into existence, is invested by law with a personality separate and
distinct from those persons composing it as well as from any other legal entity to which it may be related. By
this attribute, a stockholder may not, generally, be made to answer for acts or liabilities of the said
corporation, and vice versa.
The burden is on petitioner to prove that the corporation and its stockholders are, in fact, using
the personality of the corporation as a means to perpetrate fraud and/or escape a liability and responsibility
demanded by law. In the absence of any malice or bad faith, a stockholder or an officer of a corporation
cannot be made personally liable for corporate liabilities.
The fact that the majority stockholder had used his own money to pay part of the loan of the
corporation cannot be used as the basis to pierce. “ It is understandable that a shareholder would want to
help his corporation and in the process, assure that his stakes in the said corporation are secured.” (as
stated in the syllabus)
APPLICABLE LAWS:
The case only cited jurisprudence as reference.
FACTS:
 Land Bank of the Philippines (LBP) extended series of credit accommodations to ECO Corp., using the
trust funds of the Philippine Virginia Tobacco Administration (PVTA) in the amount of ₱26,109,000.00.
 The proceeds of the same were received by Emmanuel C. Oñate (Oñate).
 However, upon maturity of the credit accommodations, ECO Corp. failed to pay the same despite repeated
demands.
 ECO Corp. claims that the company was in financial difficulty for it was unable to collect its investments
with companies which were affected by the financial crisis brought about by the Dewey Dee scandal.
 ECO Corp. proposed and submitted to LBP a "Plan of Payment" whereby the former would set up a
financing company which would absorb the loan obligations. It was proposed that LBP would participate
in the scheme through the conversion of P9,000,000.00 which was part of the total loan, into equity.
TCHEDA
 But, LBP’s Trust Committee resolved to reject the plan of payment.
 LBP then sent a letter to the PVTA for the latter's comments. The letter stated that if LBP did not hear
from PVTA within five (5) days from the latter's receipt of the letter, such silence would be construed to
be an approval of LBP's intention to file suit against ECO and its corporate officers. PVTA did not
respond to the letter.
 Hence, the LBP filed a complaint for Collection of Sum of Money not only against ECO Corp. but also
against Oñate.
RULING OF THE LOWER COURTS:
 The trial court, held only ECO Corp. liable and absolved Oñate from personal liability for insufficiency of
evidence against him.
 The Court of Appeals affirmed this conclusion, hence the appeal before the SC.
CONTENTIONS OF PETITIONER (LBP):
 According to LBP, the ECO Corp. was formed ostensibly to allow Oñate to acquire loans from Land Bank
which he used for his personal advantage.
 Petitioner alleged among others that:
 (a) Oñate owns the majority of the interest holdings in respondent corporation, specifically during the
crucial time when appellees applied for and obtained the loan from LANDBANK, sometime in
September to November, 1980.
(b) The acronym ECO stands for the initials of Emmanuel C. Oñate, which is the logical, sensible and
concrete explanation for the name ECO, in the absence of evidence to the contrary.
(c) Respondent Oñate has always referred to himself as the debtor, not merely as an officer or a
representative of respondent corporation.
(d) Respondent Oñate personally paid P1 Million taken from trust accounts in his name.
(e) Respondent Oñate controlled respondent corporation by simultaneously holding two (2) corporate
positions, viz., as Chairman and as treasurer, beginning from the time of respondent corporation's
incorporation and continuously thereafter without benefit of election.
CONTENTIONS OF PRIVATE RESPONDENTS (ECO Corp. and Oñate):
 Private respondents, in turn, contend that Oñate's only participation in the transaction between petitioner
and respondent ECO was his execution of the loan agreements and promissory notes as Chairman of the
corporation's Board of Directors. There was nothing in the loan agreement nor in the promissory notes
which would indicate that Oñate was binding himself jointly and severally with ECO.
 They likewise deny that ECO stands for Emmanuel C. Oñate. They also note that Oñate is no longer a
majority stockholder of ECO and that the payment by a third person of the debt of another is allowed
under the Civil Code.
 They also alleged that there was no fraud and/or bad faith in the transactions between them and Land
Bank.
 Hence, they conclude, there is no legal ground to pierce the veil of ECO Corp.'s personality.
ISSUE:
Whether or not the corporate veil of ECO Management Corporation should be pierced||| and Oñate should be
held jointly and severally liable with ECO Management Corporation for the loans incurred from LBP. NO.
RULING + RATIO:
A corporation, upon coming into existence, is invested by law with a personality separate and
distinct from those persons composing it as well as from any other legal entity to which it may be related. By
this attribute, a stockholder may not, generally, be made to answer for acts or liabilities of the said corporation,
and vice versa. This separate and distinct personality is, however, merely a fiction created by law for
convenience and to promote the ends of justice. For this reason, it may not be used or invoked for ends
subversive to the policy and purpose behind its creation or which could not have been intended by law to which
it owes its being. This is particularly true when the fiction is used to defeat public convenience, justify wrong,
protect fraud, defend crime, confuse legitimate legal or judicial issues, perpetrate deception or otherwise
circumvent the law. This is likewise true where the corporate entity is being used as an alter ego, adjunct, or
business conduit for the sole benefit of the stockholders or of another corporate entity. In all these cases, the
notion of corporate entity will be pierced or disregarded with reference to the particular transaction involved.
The burden is on petitioner to prove that the corporation and its stockholders are, in fact, using the
personality of the corporation as a means to perpetrate fraud and/or escape a liability and responsibility
demanded by law. In order to disregard the separate juridical personality of a corporation, the wrongdoing must
be clearly and convincingly established. In the absence of any malice or bad faith, a stockholder or an officer of
a corporation cannot be made personally liable for corporate liabilities.
In this case, the mere fact that Oñate owned the majority of the shares of ECO is not a ground to
conclude that Oñate and ECO is one and the same. Mere ownership by a single stockholder of all or nearly all
of the capital stock of a corporation is not by itself sufficient reason for disregarding the fiction of separate
corporate personalities. Neither is the fact that the name "ECO" represents the first three letters of Oñate's name
sufficient reason to pierce the veil. Even if it did, it does not mean that the said corporation is merely a dummy
of Oñate. A corporation may assume any name provided it is lawful. There is nothing illegal in a corporation
acquiring the name or as in this case, the initials of one of its shareholders.
Also, the fact that Oñate volunteered to pay a portion of the corporation's debt demonstrated
good faith on his part to ease the debt of the corporation of which he was a part. It is understandable that
a shareholder would want to help his corporation and in the process, assure that his stakes in the said
corporation are secured. In this case, it was established that the P1 Million did not come solely from
Oñate. It was taken from a trust account which was owned by Oñate and other investors.  It was likewise
proved that the P1 Million was a loan granted by Oñate and his co-depositors to alleviate the plight of
ECO. This circumstance should not be construed as an admission that he was really the debtor and not
ECO.
DISPOSITIVE:
The petition is DENIED for lack of merit.
______________________________________________________________________________
10. Telephone Engineering & Service Co., Inc. vs. WCC
No. L-28694. May 13, 1981.*
Digest Author : Suarez
Petitioner/s : TELEPHONE ENGINEERING & SERVICE COMPANY, INC.
Respondent/s : WORKMEN’S COMPENSATION COMMISSION, LEONILA GATUS
Doctrine 1 : In appropriate cases, the veil of corporate fiction may be pierced as when the same is made as a
shield to confuse the legitimate issues
APPLICABLE LAWS: Law (you can also site the provision itself)
FACTS :
 Telephone Engineering (TESCO) and Utilities Management Corporation (UMACOR) are sister
companies both managed by Jose Luis Santiago.
 Pacifico Gatus, husband of respondent Leonila Gatus, was employed by UMACOR but was assigned to
TESCO. Gatus, contracted illness and eventually died of liver cirrhosis with malignant degeneration.
 Leonila Gatus, then filed Notice and Claim for Compensation under the Workman’s Compensation law
before the WCC. She alleged that Pacifico was an employee of TESCO.
 WCC requested TESCO to submit an Employer's Report of Accident or Sickness pursuant to Section 37
of the Workmen's Compensation Act (Act No. 3428)
 UMACOR submitted the report. UMACOR indicated that it was the employer of the deceased. The
Report was signed by Jose Luis Santiago. In answer to questions Nos. 8 and 17, the employer stated that
it would not controvert the claim for compensation, and admitted that the deceased employee
contracted illness "in regular occupation."
 TESCO filed a motion for reconsideration. Ground : that the admission made in the "Employer's Report of
Accident or Sickness" was due to honest mistake and/or excusable negligence on its part, and that the
illness for which compensation is sought is not an occupational disease, hence, not compensable under the
law.
 TESCO further asserted that : That the respondent Workmen's Compensation Commission has no
jurisdiction nor authority to render the award against your petitioner there being no employer-employee
relationship between it and the deceased Gatus.
ISSUE: Whether TESCO can held liable. – YES.
RULING + RATIO:
1. Piercing the veil of corporate fiction. Petitioner even admitted that TESCO and UMACOR are
sister companies operating under one single management and housed in the same building. Although
respect for the corporate personality as such, is the general rule, there are exceptions. In appropriate
cases, the veil of corporate fiction may be pierced as when the same is made as a shield to
confuse the legitimate issues.
Not related to subject matter:
2. Factual questions cannot be raised for the first time on appeal to the Supreme Court. While,
indeed, jurisdiction cannot be conferred by acts or omission of the parties, TESCO’s denial at this
stage that it is the employer of the deceased is obviously an afterthought, a devise to defeat the law
 and evade its obligations. This denial also constitutes a change of theory on appeal which is not
allowed in this jurisdiction. Moreover, issues not raised before the Workmen’s Compensation
Commission cannot be raised for the first time on appeal. For that matter, a factual question may not
be raised for the first time on appeal to the Supreme Court.
3. Non-exhaustion of administrative remedies makes the certiorari filed as premature. This
Certiorari proceeding must also be held to have been prematurely brought. Before a petition for
Certiorari can be instituted, all remedies available in the trial Court must be exhausted first.
Certiorari cannot be resorted to when the remedy of appeal is present. What is sought to be annulled
is the award made by the Referee. However, TESCO did not pursue the remedies available to it
under Rules 23, 24 and 25 of the Rules of the Workmen’s Compensation Commission, namely, an
appeal from the award of the Referee, within fifteen days from notice, to the Commission; a petition
for reconsideration of the latter’s resolution, if adverse, to the Commission en banc; and within ten
days from receipt of an unfavorable decision by the latter, an appeal to this Court. As petitioner had
not utilized these remedies available to it, Certiorari will not lie, it being prematurely filed.
______________________________________________________________________
11. Emilio Cano Enterprise v CA
G.R. No. L-20502, February 26, 1965
Digest Author : Santos
Petitioner/s : Emilio Cano Enterprise Inc., Emilio, Ariston and Rodolfo – all surnamed Cano
Respondent/s : Mariano B. Tuason for respondent Court of Industrial Relations and Honorata Cruz.
Ponente: Bautista Angelo, J
DOCTRINE: 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.
FACTS :
 Emilio, Ariston and Rodolfo, were made respondents in their capacity as president and proprietor, field
supervisor and manager, of Emilio Cano Enterprises, Inc.,
 A case of unfair labor practice was filed against them by Honorata Cruz.
 Cruz won and the court ordered the Canos to:(1) reinstate Cruz to her former position and (2) to pay
backwages.
 Canos filed an appeal to CIR but lost. The court issued a writ of execution against the properties of
Emiliio Cano Enterprises Inc.
 The corporation filed an ex parte motion to quash the writ on the ground that the judgment sought to be
enforced was not rendered against it which is a juridical entity separate and distinct from its officials.
Motion was denied.
ISSUE:
Whether the properties of Emilio Cano Enterprise Inc should be held liable to answer the writ of execution?
-Yes
RULING:
 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.
 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.
 Emilio and Rodolfo Cano are indicted, not in their private capacity, but as officers, of Emilio Cano
Enterprises, Inc. Having been sued officially their connection with the case must be deemed to be
impressed with the representation of the corporation. In fact, the court's order is for them to reinstate Cruz
to her former position in the corporation and pay her the wages she had been deprived of during her
separation. Verily, the order against them is in effect against the corporation.
______________________________________________________________
12. MC CONNEL v CA
G.R. No. L-10510, March 17, 1961
Santiago, Arnel A
PETITIONER: M. MC CONNEL, W. P. COCHRANE, RICARDO RODRIGUEZ, ET AL
RESPONDENT: THE COURT OF APPEALS and DOMINGA DE LOS REYES
DOCTRINE:
- PIERCING THE VEIL - Wherever circumstances have shown that the corporate entity is being
used as an alter ego or business conduit for the sole benefit of the stockholders, or else to defeat
public convenience, justify wrong, protect fraud, or defend crime 
FACTS:
- Park Rite Co., Inc., a Philippine corporation, was originally organized on or about April 15, 1947,
with a capital stock of 1,500 shares at P1.00 a share. The corporation leased from Rafael Perez
Rosales y Samanillo a vacant lot on Juan Luna street (Manila) which it used for parking motor
vehicles for a consideration.
- It turned out that in operating its parking business, the corporation occupied and used not only the
Samanillo lot it had leased but also an adjacent lot belonging to the respondents-appellees Padilla,
without the owners' knowledge and consent. When the latter discovered the truth around October of
1947, they demanded payment for the use and occupation of the lot.
- The corporation (then controlled by petitioners Cirilo Parades and Ursula Tolentino, who had
purchased and held 1,496 of its 1,500 shares) disclaimed liability, blaming the original
incorporators, McConnel, Rodriguez and Cochrane.
RULING OF LOWER COURTS:
- RTC – Ruled in favor of Respondents. Found out that the corporation has no assets to pay the dept.
- Judgement Creditors filed a case against past and present stockholders to recover the suit.
- CA- Affirmed it.
ISSUE:
- Whether the stockholders can be held liable to answer - YES
RULING:
The Veil may be pierced
- Wherever circumstances have shown that the corporate entity is being used as an alter ego or
business conduit for the sole benefit of the stockholders, or else to defeat public convenience, justify
wrong, protect fraud, or defend crime.
- When it was originally organized on or about April 15, 1947, the original incorporators were M.
McConnel, W. P. Cochrane, Ricardo Rodriguez, Benedicto M. Dario and Aurea Ordrecio with a
capital stock of P1,500.00 divided into 1,500 shares at P1.00 a share. McConnel and Cochrane each
owned 500 shares, Ricardo Rodriguez 408 shares, and Dario and Ordrecio 1 share each
- When it was originally organized on or about April 15, 1947, the original incorporators were M.
McConnel, W. P. Cochrane, Ricardo Rodriguez, Benedicto M. Dario and Aurea Ordrecio with a
 capital stock of P1,500.00 divided into 1,500 shares at P1.00 a share. McConnel and Cochrane each
owned 500 shares, Ricardo Rodriguez 408 shares, and Dario and Ordrecio 1 share each.
- Then or about August 22, 1947 the defendants Cirilo Paredes and Ursula Tolentino purchased 1,496
shares of the said corporation and the remaining four shares were acquired by Bienvenido J. Claudio,
Quintin C. Paredes, Segundo Tarictican, and Paulino Marquez at one share each. It is obvious that
the last four shares bought by these four persons were merely qualifying shares and that to all intents
and purposes the spouses Cirilo Paredes and Ursula Tolentino composed the so-called Park Rite Co.,
Inc. 
 3. In the period from October 11, 1988 until July 12, 1989, BMPI placed with Printwell several orders on
credit, evidenced by invoices and delivery receipts totaling P316,342.76.Considering that BMPI paid only
P25,000.00, Printwell sued BMPIon January 26, 1990 for the collection of the unpaid balance of P291,342.76 in
the RTC
 
4. On February 8, 1990, Printwell amended the complaint in order to implead as defendants all the original
stockholders and incorporators to recover on their unpaid subscriptions, as follows:
 

- The facts thus found can not be varied by us, and conclusively show that the corporation is a mere Name Unpaid Shares
instrumentality of the individual stockholder's, hence the latter must individually answer for the
corporate obligations. Donnina C. Halley P 262,500.00

_____________________________________________________________ Roberto V. Cabrera, Jr. P135,000.00

Albert T. Yu P135,000.00
13. Halley vs. Printwell
G.R. No. 157549
Zenaida V. Yu P15,000.00
Author: George F. Rasalan
Rizalino C. Vieza P15,000.00
Doctrine:
TOTAL P 562,500.00
Stockholders of a corporation are liable for the debts of the corporation up to the extent of their unpaid  
subscriptions. They cannot invoke the veil of corporate identity as a shield from liability, because the veil
may be lifted to avoid defrauding corporate creditors. 5. The defendants filed a consolidated answer, averring that they all had paid their subscriptions in full; that
BMPI had a separate personality from those of its stockholders; that Rizalino C. Vieza had assigned his fully-
It is established doctrine that subscriptions to the capital of a corporation constitute a fund to which paid up shares to a certain Gerardo R. Jacinto in 1989; and that the directors and stockholders of BMPI had
creditors have a right to look for satisfaction of their claims and that the assignee in insolvency can resolved to dissolve BMPI during the annual meeting held on February 5, 1990.
maintain an action upon any unpaid stock subscription in order to realize assets for the payment of its  
debts 6. To prove payment of their subscriptions, the defendant stockholders submitted in evidenceBMPI official
receipt (OR) no. 217, OR no. 218, OR no. 220,OR no. 221, OR no. 222, OR no. 223, andOR no. 227,to wit:
 
Petitioner: Halley
Respondent: Printwell Receipt No. Date Name Amount

Articles Applicable: 217 November 5, 1987 Albert T. Yu P 45,000.00

Trust fund Doctrine 218 May 13, 1988 Albert T. Yu P 135,000.00

Facts: 220 May 13, 1988 Roberto V. Cabrera, Jr. P 135,000.00

1. The petitioner was an incorporator and original director of Business Media Philippines, Inc. (BMPI), which, 221 November 5, 1987 Roberto V. Cabrera, Jr. P 45,000.00
at its incorporation on November 12, 1987, had an authorized capital stock of P3,000,000.00 divided into
300,000 shares each with a par value of P10.00,of which 75,000 were initially subscribed, to wit: 222 November 5, 1987 Zenaida V. Yu P 5,000.00
 
223 May 13, 1988 Zenaida V. Yu P 15,000.00
Subscriber No. of shares Total subscription
227 May 13, 1988 Donnina C. Halley P 262,500.00
Donnina C. Halley 35,000 P 350,000.00
 
Roberto V. Cabrera, Jr. 18,000 P 180,000.00  
7.In addition, the stockholders submitted other documents in evidence, namely:(a) an audit report dated March
Albert T. Yu 18,000 P 180,000.00 30, 1989 prepared by Ilagan, Cepillo & Associates (submitted to the SEC and the BIR); (b) BMPIbalance sheet
and income statement as of December 31, 1988; (c) BMPI income tax return for the year 1988 (stamped
Zenaida V. Yu 2,000 P 20,000.00 received by the BIR); (d) journal vouchers; (e) cash deposit slips; and(f)Bank of the Philippine Islands (BPI)
savings account passbook in the name of BPMI
Rizalino C. Vineza 2,000 P 20,000.00

TOTAL 75,000 P750,000.00 Ruling of Lower Courts: the decision in favor of Printwell, rejecting the allegation of payment in full of
  the subscriptions in view of an irregularity in the issuance of the ORs and observing that the defendants
 2. Printwell engaged in commercial and industrial printing.BMPI commissioned Printwell for the printing of had used BMPIs corporate personality to evade payment and create injustice. PRO RATA among
the magazine Philippines, Inc. (together with wrappers and subscription cards) that BMPI published and sold. stockholders
For that purpose, Printwell extended 30-day credit accommodations to BMPI.
All appealed except BMPI
Ruling of CA: Affirmed the RTC decision.
The CA declared that the inconsistency in the issuance of the ORs rendered the claim of full payment of the
subscriptions to the capital stock unworthy of consideration; and held that the veil of corporate fiction could be
pierced when it was used as a shield to perpetrate a fraud or to confuse legitimate issues,
Conditioner of Petitioner
Appellants SPS YU, argued that the fact of full payment for the unpaid subscriptions was incontrovertibly
established by competent testimonial and documentary evidence, namely Exhibits 1, 2, 3 & 4, which were never
disputed by appellee, clearly shows that they should not be held liable for payment of the said unpaid
subscriptions of BMPI.
Only Halley appealed in the SC
Issue:
1. Whether or not Halley is liable for the unpaid amount to Printwell by piercing the vail and used of doctrine of
trust fund?-YES
2. Is the CA and RTC correctly distributed the payment to Printwell trough PRO-RATA- No
Ruling: YES
Although a corporation has a personality separate and distinct from those of its stockholders, directors, or
officers,such separate and distinct personality is merely a fiction created by law for the sake of convenience and
to promote the ends of justice. The corporate personality may be disregarded, and the individuals composing the
corporation will be treated as individuals, if the corporate entity is being used as a cloak or cover for fraud or
illegality; as a justification for a wrong; as an alter ego, an adjunct, or a business conduit for the sole benefit of
the stockholders.As a general rule, a corporation is looked upon as a legal entity, unless and until sufficient
reason to the contrary appears. Thus,the courts always presume good faith, and for that reason accord prime
importance to the separate personality of the corporation, disregarding the corporate personality only after the
wrongdoing is first clearly and convincingly established.It thus behooves the courts to be careful in assessing
the milieu where the piercing of the corporate veil shall be done.
RTC and CA correctly apply the trust fund doctrine.
 
We clarify that the trust fund doctrine is not limited to reaching the stockholders unpaid subscriptions. The
scope of the doctrine when the corporation is insolvent encompasses not only the capital stock, but also other
property and assets generally regarded in equity as a trust fund for the payment of corporate debts. All assets
and property belonging to the corporation held in trust for the benefit of creditors that were distributed or in the
possession of the stockholders, regardless of full payment of their subscriptions, may be reached by the creditor
in satisfaction of its claim.
 
Also, under the trust fund doctrine, a corporation has no legal capacity to release an original subscriber to its
capital stock from the obligation of paying for his shares, in whole or in part,without a valuable consideration,
or fraudulently, to the prejudice of creditors. The creditor is allowed to maintain an action upon any unpaid
subscriptions and thereby steps into the shoes of the corporation for the satisfaction of its debt. To make out a
prima facie case in a suit against stockholders of an insolvent corporation to compel them to contribute to the
payment of its debts by making good unpaid balances upon their subscriptions, it is only necessary to establish
that thestockholders have not in good faith paid the par value of the stocks of the corporation.
To reiterate, the petitioner was liable pursuant to the trust fund doctrine for the corporate obligation of BMPI by
virtue of her subscription being still unpaid. Printwell, as BMPIs creditor,had a right to reach her unpaid
subscription in satisfaction of its claim.
2. We do not agree. The RTC lacked the legal and factual support for its prorating the liability. Hence, we need
to modify the extent of the petitioners personal liability to Printwell. The prevailing rule is that a stockholder is
personally liable for the financial obligations of the corporation to the extent of his unpaid subscription.In view
ofthe petitioners unpaid subscription being worth P262,500.00, shew as liable up to that amount.
 
ACCORDINGLY, we deny the petition for review on certiorari; and affirm with modification the decision of
CA and RTC.
________________________________________________________________________________
14. Yutivo Sons Hardware Company, petitioner, vs. Court of Tax Appeals and Collector of Internal
Revenue, respondents.
GR No. L-13202. January 28, 1961. – Pinlac
Doctrine: It is an elementary and fundamental principle of corporation law that a corporation is an
entity separate and distinct from its stockholders and from other corporation petitions to which it may be
connected. However, "when the 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 of persons, or in
the case of two corporations merge them into one. Another rule is that, when the corporation is the "mere
alter ego or business conduit of a person, it may be disregarded." 
Facts:
 Yutivo Sons Hardware Co. is a domestic corporation engaged, prior to the last world war, in the
importation and sale of hardware supplies and equipment. After liberation, it resumed its business
and until June of 1946 bought a number of cars and trucks from General Motors Overseas
Corporation (GM), an American corporation licensed to do business in the Philippines.
 On June 13, 1946, the Southern Motors, Inc. (SM) was organized to engage in the business of selling
cars, trucks and spare parts. Three of its major subscribers are the sons of Yu Tiong Yee, one of
Yutivo’s founders.
 After the incorporation of SM and until the withdrawal of GM from the Philippines in the middle of
1947, the cars and trucks purchased by Yutivo from GM were sold by Yutivo to SM which, in turn,
sold them to the public in the Visayas and Mindanao.
 When GM decided to withdraw from the Philippines in the middle of 1947, the U.S. manufacturer of
GM cars and trucks appointed Yutivo as importer for the Visayas and Mindanao, and Yutivo
continued its previous arrangement of selling exclusively to SM.
 In the same way that GM used to pay sales taxes based on its sales to Yutivo, the latter, as importer,
paid sales tax prescribed on the basis of its selling price to SM, and since such sales tax, as already
stated, is collected only once on original sales, SM paid no sales tax on its sales to the public.
 Collector of Internal Revenue (Collector) made an assessment upon Yutivo and charged P1.8M as
deficiency tax.
 Yutivo contested before the CTA. CTA ruled that SM is a mere subsidiary or instrumentality of
Yutivo, hence its corporate existence must be disregarded.
Issue: Whether or not SM has a separate corporate personality from Yutivo? – NONE.
Ruling:
It is an elementary and fundamental principle of corporation law that a corporation is an entity separate and
distinct from its stockholders and from other corporation petitions to which it may be connected. However,
"when the 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 of persons, or in the case of two corporations
merge them into one. Another rule is that, when the corporation is the "mere alter ego or business conduit of a
person, it may be disregarded." 
The Court is inclined to rule that the CTA was not justified in finding that SM was organized to defraud the
Government of its lawful revenues. In the first place, this corporation was organized in June, 1946 when it
could not have caused Yutivo any tax savings. From that date up to June 30, 1947, or a period of more than one
year, GM was the importer of the cars and trucks sold to Yutivo, which, in turn resold them to SM. During that
period, it is not disputed that GM as importer, was the one solely liable for sales taxes. Neither Yutivo or SM
was subject to the sales taxes on their sales of cars and trucks. The sales tax liability of Yutivo did not arise until
July 1, 1947 when it became the importer and simply continued its practice of selling to SM. The decision,
therefore, of the Tax Court that SM was organized purposely as a tax evasion device runs counter to the fact
that there was no tax to evade.
The intention to minimize taxes, when used in the context of fraud, must be proved to exist by clear and
convincing evidence amounting to more than mere preponderance, and cannot be justified by a mere
speculation. This is because fraud is never lightly to be presumed. Fraud is never imputed and the courts never
sustain findings of fraud upon circumstances which, at the most, create only suspicion.
In the second place, SM was organized and it operated, under circumstance that belied any intention to evade
sales taxes. "Tax evasion" is a term that connotes fraud thru the use of pretenses and forbidden devices to lessen
or defeat taxes. The transactions between Yutivo and SM, however, have always been in the open, embodied in
private and public documents, constantly subject to inspection by the tax authorities. As a matter of fact, after
Yutivo became the importer of GM cars and trucks for Visayas and Mindanao, it merely continued the method
of distribution that it had initiated long before GM withdrew from the Philippines.
 It must be remembered that the fraud which respondent Collector imputed to Yutivo must be related to its filing
of sales tax returns of less taxes than were legally due. The allegation of fraud, however, cannot be sustained
without the showing that Yutivo, in filing said returns, did so fully knowing that the taxes called for therein
were less than what were legally due. 
We are, however, inclined to agree with the court below that SM was actually owned and controlled by Yutivo
as to make it a mere subsidiary or branch of the latter created for the purpose of selling the vehicles at retail and
maintaining stores for spare parts as well as service repair shops.
- It is admitted that SM was organized by the leading stockholders of Yutivo.
- SM is under the management and control of Yutivo by virtue of a management contract entered into
between the two parties. The controlling majority of the Board of Directors of Yutivo is also the
controlling majority of the Board of Directors of SM. At the same time the principal officers of both
corporations are identical.
- Cash or funds of SM, including those of its branches which are directly remitted to Yutivo, are
placed in the custody and control of Yutivo, resources and subject to withdrawal only by Yutivo.
SM's being under Yutivo's control, the former's operations and existence became dependent upon the
latter.
Southern Motors being but a mere instrumentality, or adjunct of Yutivo, the Court of Tax Appeals correctly
disregarded the technical defense of separate corporate entity in order to arrive at the true tax liability of Yutivo.
______________________________________________________________________________
15. LUISITO PADILLA and PHOENIX-OMEGA DEVELOPMENT AND MANAGEMENT
CORPORATION vs THE HONORABLE COURT OF APPEALS and SUSANA REALTY, INC
G.R. No. 123893 , November 22, 2001
Digest Author : Francis Mundin
Petitioner/s : LUISITO PADILLA and PHOENIX-OMEGA DEVELOPMENT AND MANAGEMENT
CORPORATION
Respondent/s : THE HONORABLE COURT OF APPEALS and SUSANA REALTY
DOCTRINE: For the separate juridical personality of a corporation to be disregarded, the wrongdoing must
be clearly and convincingly established. It cannot be presumed.
APPLICABLE LAWS: The general rule is that a corporation is clothed with a personality separate and distinct
from the persons composing it. It may not be held liable for the obligations of the persons composing it, and
neither can its stockholders be held liable for its obligations.
This veil of corporate fiction may only be disregarded in cases where the corporate vehicle is being used to
defeat public convenience, justify wrong, protect fraud, or defend crime
FACTS :
 Susana Realty, Inc. (SRI), by a deed of absolute sale, sold to the Light Rail Transit Authority
(LRTA) several parcels of land located in Taft Avenue Extension, San Rafael District, Pasay
City
 SRI reserved to itself the right of first refusal to develop and/or improve the property sold
should the LRTA decide to lease and/or assign to any person the right to develop and/or
improve the property.
 A contract was thus entered into on July 28, 1988 between Phoenix Omega and SRI with
LRTA whereby Phoenix Omega undertook to construct commercial stalls on the 90-sq. m.
property in accordance with plans and specifications prepared by the latter
 only upon SRI's approval of such plans and specifications. Also on July 28, 1988, Phoenix
Omega, by a deed of assignment, assigned its right and interests over the remaining property
unto its sister company, PKA Development and Management Corporation (PKA)
 subject to PKA's correction of the defects in the construction to conform to BP 344.
RULING OF THE LOWER COURTS:
 RTC – Declaring the rescission and termination of the Contract of Lease, as amended, and the passing in
ownership of all the improvements now existing on the premises, and ordering plaintiff to surrender
possession of the leased premises to the defendant.
 the defendant-judgment creditor Susana Realty, Inc., let an alias writ of execution issue against the
properties, both real and personal, of PKA Development and Management Corporation, of Phoenix-
Omega Development Corporation, and of Luisito B. Padilla,
CONTENTIONS OF PETITIONER:
 Petitioners stress that the RTC, the CA, and this Court, in the main case (Civil Case No. 7302), did not
find them solidarily liable with PKA, and rightly so since PKA and Phoenix-Omega are two different
entities.
 Phoenix-Omega's only participation in the properties subject of the main case was as the construction
company that would develop the properties on behalf of PKA
 Phoenix-Omega was involved in the amended lease agreement between SRI and PKA only to the extent
that it had to apply the terms of the tripartite agreement (among LRTA, SRI, and Phoenix-Omega) to the
development of the LRTA-owned property situated in front of the lots leased to PKA by SRI
 Petitioners protest the piercing of the veil of corporate fiction between themselves and PKA. They contend
that the court must first acquire jurisdiction over the corporation attempting to misuse the corporate
vehicle to shield the commission of a fraud.
 Petitioners contend that the finding by the trial court as regards the single personality of PKA and
Phoenix-Omega was made only to refute PKA's claim that it was not liable for constructions made by
Phoenix- Omega outside the leased areas.
CONTENTIONS OF RESPONDENT:
 private respondent argues that there is no error in the issuance of the alias writ of execution against
the properties of petitioners since the trial court, the CA, and this Court had all ruled that petitioners
and PKA are in reality one and the same entity.
ISSUE: Whether piercing of the corporate veil is needed in this case?. – NO.
RULING + RATIO: PKA and Phoenix-Omega are admittedly sister companies, and may be sharing
personnel and resources, but we find in the present case no allegation, much less positive proof, that their
separate corporate personalities are being used to defeat public convenience, justify wrong, protect fraud,
or defend crime. "For the separate juridical personality of a corporation to be disregarded, the
wrongdoing must be clearly and convincingly established. It cannot be presumed." We find no reason to
justify piercing the corporate veil in this instance.
Conclusion.
We understand private respondent's frustration at not being able to have the monetary award in their favor
satisfied. But given the circumstances of this case, public respondent cannot order the seizure of petitioners'
properties without violating their constitutionally enshrined right to due process, merely to compensate private
respondent