Arco Pulp & Paper Co. Inc.

v.
Lim
G.R. No. 206806
June 25, 2014

Facts:

Lim engaged in supplying scrap papers, cartons, and other raw materials, under the
name Quality Paper and Plastic Products, Enterprises and one of its clients is the Arco Pulp and
Paper Corporation represented by its CEO and President Candida Santos. For the supply of
materials given by Lim, he was issued a check by Santos, however such check bounced. Lim
sued for collection of money to which the court ruled in his favor and finding Santos to be
solidarily liable with the corporation for the award of exemplary damages.

Issues:
1. Whether or not the doctrine of piercing the veil of corporate fiction is proper.
2. Whether or not Candida A. Santos solidarily liable with Arco Pulp and Paper Co., Inc.

Ruling:

1. Yes, the corporate existence may be disregarded where the entity is formed or used for
non- legitimate purposes, such as to evade a just and due obligation, or to justify a
wrong, to shield or perpetrate fraud or to carry out similar or inequitable
considerations, other unjustifiable aims or intentions, in which case, the fiction will be
disregarded and the individuals composing it and the two corporations will be treated as
identical.

2. Yes, in this case, when Arco Pulp’s obligation to Lim became due and demandable,
petitioner Santos not only issued an unfunded check but also contracted with a third
party in an effort to shift Arco Pulp’s liability. She unjustifiably refused to honor Arco
Pulp’s obligations to respondent. These acts clearly amount to bad faith which would
justify the piercing the veil of corporate entity and holding Santos and Arco Pulp
solidarily liable.