1. Koppel (Phil) Inc. v.

Yatco / 77 Phil 496

 W/N Koppel (Phil) Inc. is separate from, and not a mere branch of Koppel Industrial Car and Equipment
Co.
No. No group of businessmen could be expected to organize a mercantile corporation—the ultimate end of
which could only be profit—if the amount of that profit were to be subjected to such a unilateral control of
another corporation, unless indeed the former has previously been designed by the incorporators to serve as
a mere subsidiary, branch or agency of the latter. Koppel Industrial Car and Equipment Company made use
of its ownership of the overwhelming majority—99.5%—of the capital stock of the local corporation to control
the operations of the latter to such an extent that it had the final say even as to how much should be allotted to
said local entity in the so-called sharing in the profits.
 A deliberate intent, through the medium of a scheme devised with great care, to avoid the payment of precisely
the 1½per cent merchants' sales tax in force in the Philippines.
 A corporation will be looked upon as a legal entity as a general rule, and until sufficient reason to the contrary
appears; but, 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.
2. Concept Builders Inc. v. NLRC / 257 SCRA 149 INSTRUMENTALITY OR ALTER EGO DOCTRINE
 Concept Builder’s Inc. illegal dismissal Hydro Pipes Philippines - employees
 It is a fundamental principle of corporation law that 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. 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.
 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, but certainly, there are some
probative factors of identity that will justify the application of the doctrine of piercing the corporate veil, to wit: “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. 4. Methods of conducting the
business.”
 The test in determining the applicability of the doctrine of piercing the veil of corporate fiction is as follows: “1.
Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy
and business practice in respect to the transaction attacked so that the corporate entity as to this transaction
had at the time no separate mind, will or existence of its own; 2. Such control must have been used by the
defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive legal duty, or
dishonest and unjust act in contravention of 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.
 INSTRUMENTALITY RULE “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.”
 In this case, the NLRC noted that, while petitioner claimed that it ceased its business operations on April 29,
1986, it filed an Information Sheet with the Securities and Exchange Commission on May 15, 1987, 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.
Furthermore, the NLRC stated that:
"Both information sheets were filed by the same Virgilio O. Casiño as the corporate secretary of both
corporations. It would also not be amiss to note that both corporations had the same president, the same board
of directors, the same corporate officers, and substantially the same subscribers.
From the foregoing, it appears that, among other things, the respondent (herein petitioner) and the third-party
claimant shared the same address and/or premises. Under this circumstances, (sic) it cannot be said that the
property levied upon by the sheriff were not of respondents. 16
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.
3. Gregorio Araneta Inc. v. Tuason de Paterno / 91 Phil 786
 The fiction of corporate entity of a corporation, which has long been organized and has engaged in real estate
business, will not be disregarded apart from the members of the corporation, where the corporate entity was not
used to circumvent the law or perpetrate deception 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."
 JOSE ARANETA - agent of Tuazon and the president of Gregorio Araneta Inc.
 The trial court found that Jose Araneta was not Paz Tuason's agent or broker. This finding is contrary to the
clear weight of the evidence, although the point would be irrelevant, if the court were right in its holding that
Exhibit A was void on another ground, i.e., it was inconsistent with Exhibit 1.

Without taking into account defendant's Exhibit 7 and 8, which the court rejected and which, in our opinion,
should have been admitted, Exhibit 1 is decisive of the defendant's assertion. In paragraph 8 of Exhibit 1 Jose
Araneta was referred to as defendant's agent or broker "who acts in this transaction" and who as such was to
receive a commission of 5 per cent, although the commission was to be charged to the purchasers, while in
paragraph 13 the defendant promised, in consideration of Jose Araneta's services rendered to her, to assign to
him all her right, title and interest to and in certain lots not embraced in the sales to Gregorio Araneta, Inc. or the
tenants.

However, the trial court hypothetically admitting the existence of the relation of principal and agent between Paz
Tuason and Jose Araneta, pointed out that not Jose Araneta but Gregorio Araneta, Inc. was the purchaser, and
cited the well-known distinction between the corporation and its stockholders. In other words, the court opined
that the sale to Gregorio Araneta, Inc. was not a sale to Jose Araneta the agent or broker.

The defendant would have the court ignore this distinction and apply to this case the other well-known principle
which is thus stated in 18 C.J.S. 380: "The courts, at law and in equity, will disregard the fiction of
corporate entity apart from the members of the corporation when it is attempted to be used as a means
of accomplishing a fraud or an illegal act.".

It will at once be noted that this principle 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 to 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." (18 C.J.S. 381.)