ALCANAR, Bernalyn D.

Case Digests No. 2

Doctrine: Due to a corporation’s status as a distinct legal entity and because

of a conscious policy decision to promote capital formation, a corporation
incurs its own liabilities and is legally responsible for payment of its
obligations. In other words, by virtue of the separate juridical personality of a
corporation, the corporate debt or credit is not the debt or credit of the
stockholder. This protection from liability for shareholders is the principle of
limited liability.

Case Title: Aboitiz Equity Ventures, Inc. vs. Victor S. Chiongbian, GR.
No. 197530, July 9, 2014 (J. Leonen)

Facts: In 1996, Aboitiz Shipping Corporation (ASC), Carlos A. Gothong

Lines, Inc. (CAGLI), and William Lines, Inc. (WLI) entered into an agreement
(Agreement) whereby ASC and CAGLI would transfer their shipping assets
to WLI in exchange for WLI’s shares of stock. WLI, in turn, would run their
merged shipping businesses and, henceforth, be known as WG&A, Inc.
Attached to the Agreement was Annex SL-V, which confirmed WLI’s
commitment to acquire certain inventories of CAGLI in the amount of P400M.
Pursuant to said Annex, inventories worth P558M were transferred from
CAGLI to WLI. CAGLI was paid P400M plus WG&A shares with a book value
of P38.5M.

Since there was still balance, CAGLI sent WG&A (formerly WIL) demand
letters in 2001 for the return of or the payment for the excess inventories.
Aboitiz Equity Ventures (AEV) alleged that to satisfy CAGLI’s demand,
WLI/WG&A returned inventories amounting to P120.04M.

AEV became a stockholder of WG&A. Subsequently, WG&A was renamed

Aboitiz Transport Shipping Corporation (ATSC).

In 2008, CAGLI resumed making demands despite having already received

P120.04M worth of excess inventories. These demand letters were
addressed to AEV and another company affiliated with the Chiongbian
family.
Its claims left unsatisfied, CAGLI filed two applications for arbitration against
AEV before the Cebu City RTC Branches 20 and 10. The first application
was dismissed. CAGLI obtained a favorable ruling in the second application.

Issue: Whether AEV is bound by an agreement to arbitrate with CAGLI with

respect to the latter’s claims for unreturned inventories delivered to
WLI/WG&A, Inc./Aboitiz Transport System Corporation.

Held: No, AEV is not bound by an agreement to arbitrate with CAGLI.

Pursuant to the SPA, the Gothong group and the Chiongbian group
transferred their shares to AEV. With the SPA, AEV became a stockholder
of WLI/WG&A, which was subsequently renamed ATSC. Nonetheless,
AEV’s status as ATSC’s stockholder does not subject it to ATSC’s
obligations.

A corporation has a personality separate and distinct from that of its

individual stockholders. Thus, a stockholder does not automatically assume
the liabilities of the corporation of which he is a stockholder.

Due to a corporation’s status as a distinct legal entity and as a result of a

conscious policy decision to promote capital formation, a corporation incurs
its own liabilities and is legally responsible for payment of its obligations. In
other words, by virtue of the separate juridical personality of a corporation,
the corporate debt or credit is not the debt or credit of the stockholder. This
protection from liability for shareholders is the principle of limited liability

All told, AEV’s status as ATSC’s stockholder is, in and of itself, insufficient to
make AEV liable for ATSC’s obligations.

WHEREFORE, the petition is GRANTED. The assailed orders dated May 5,

2011 and June 24,2011 of the Regional Trial Court, Cebu City, Branch 10 in
Civil Case No. CEB-37004 are declared VOID. The Regional Trial Court,
Cebu City, Branch 10 is ordered to DISMISS Civil Case No. CEB-37004.
Doctrine: To pierce the veil of corporate fiction, there should be clear and
convincing proof that fraud, illegality or inequity has been committed against
third persons.

Case Title: Malixi vs. Mexicali Philippines, G.R. No. 205061, June 8, 2016

Facts: Petitioner alleged that on August 12, 2008, she was hired by
respondents as a team leader assigned at the delivery service.

In October 2008, Mexicali's training officer, Jay Teves (Teves), informed her
of the management's intention to transfer and appoint her as store manager
at a newly opened branch in Alabang Town Center, which is a joint venture
between Mexicali and Calexico Food Corporation (Calexico), due to her
satisfactory performance. She then subsequently submitted a resignation
letter dated October 15, 2008, as advised by Teves.

On October 17, 2008, she started working as the store manager of Mexicali
in Alabang Town Center although, again, no employment contract and ID
were issued to her. However, in December 2008, she was compelled by
Teves to sign an end-of-contract letter by reason of a criminal complaint for
sexual harassment she filed on December 3, 2008 against Mexicali's
operations manager. Upon her vehement refusal to sign, she was informed
by Luna that it was her last day of work.

Respondents, however, denied responsibility over petitioner's alleged

dismissal. They averred that petitioner has resigned from Mexicali in October
2008 and hence, was no longer Mexicali's employee at the time of her
dismissal but rather an employee of Calexico, a franchisee of Mexicali
located in Alabang Town Center which is a separate and distinct corporation.

Issue: Whether Mexicali was still Malixi’s employer upon her transfer to
Calexico since she was hired and dismissed by Mexicali's officers and that
Mexicali exercised the power of control over her work performance.

Held: No, Mexicali was no longer Malixi’s employer upon her transfer to
Calexico.
The Labor Arbiter's finding that the two corporations are one and the same
with interlocking board of directors has no factual basis. It is basic that "a
corporation is an artificial being invested with a personality separate and
distinct from those of the stockholders and from other corporations to which
it may be connected or related." Clear and convincing evidence is needed to
warrant the application of the doctrine of piercing the veil of corporate fiction.

At any rate, the Court has ruled that the existence of interlocking directors,
corporate officers and shareholders is not enough justification to disregard
the separate corporate personalities. To pierce the veil of corporate fiction,
there should be clear and convincing proof that fraud, illegality or inequity
has been committed against third persons. For while respondents' act of not
issuing employment contract and ID may be an indication of the proof
required, however, this, by itself, is not sufficient evidence to pierce the
corporate veil between Mexicali and Calexico.

WHEREFORE, the Petition is DENIED. The August 29, 2012 Decision and
December 14, 2012 Resolution of the Court of Appeals in CA-G.R. SP No.
115413 affirming the May 28, 2010 Resolution of the National Labor
Relations Commission are AFFIRMED with MODIFICATION that the order
for respondent Mexicali Food Corporation to cause the reinstatement of
petitioner Emerita G. Malixi to her former position as store manager at
Calexico Food Corporation without backwages is DELETED. The Complaint
against respondents Mexicali Philippines and/or Francesca Mabanta
is DISMISSED.
Doctrine: Where it appears that business enterprises are owned, conducted
and controlled by the same parties, law and equity will disregard the legal
fiction that these corporations are distinct entities and shall treat them as
one.

Case Title: Vicmar Development Corporation vs. Elarcosa, G.R. No.

202215, December 9, 2015 (J. Del Castillo)

Facts: According to respondents, Vicmar, a domestic corporation engaged

in manufacturing of plywood for export and for local sale, employed some of
them as early as 1990 and since their engagement they had been performing
the heaviest and dirtiest tasks in the plant operations.

Respondents declared that Vicmar paid them minimum wage and a small
amount for overtime but it did not give them benefits as required by law, such
as Philhealth, Social Security System, 13th month pay, holiday pay, rest day
and night shift differential. They added that Vicmar employed more than 200
regular employees and more than 400 "extra" workers.

Sometime in 2004, Vicmar allegedly informed respondents that they would

be handled by contractors. Respondents stated that these contractors were
former employees of Vicmar and had no equipment and facilities of their own.
They averred that as a result thereof, the wages of a number of them were
reduced. They protested said wage decrease but to no avail. Thus, they filed
a Complaint with the DOLE for violations of labor standards for which
appropriate compliance orders were issued against Vicmar.

Respondents claimed that on September 13, 2004, 28 of them were no

longer scheduled for work and that the remaining respondents, including
their sons and brothers, were subsequently not given any work schedule.

Issue: Whether the contractors Vicmar engaged were legitimate labor

contractors.

Held: No, the contractors Vicmar engaged were not legitimate labor
contractors.
Where it appears that business enterprises are owned, conducted and
controlled by the same parties, law and equity will disregard the legal fiction
that these corporations are distinct entities and shall treat them as one. This
is in order to protect the rights of third persons, as in this case, to safeguard
the rights of respondents.

Petitioners cannot rely on the registration of their contractors to prove that

the latter are legitimate independent contractors. Such registration is not
conclusive of the status of a legitimate contractor; rather, it merely prevents
the presumption of being a labor-only contractor from arising. Indeed, to
determine whether labor-only contracting exists, the totality of the facts and
circumstances of the case must be considered.

Furthermore, petitioners failed to refute the contention that Vicmar and its
branches have the same owner and management - which included one
resident manager, one administrative department, one and the same
personnel and finance sections. Notably, all respondents were employed by
the same plant manager, who signed their identification cards some of whom
were under Vicmar, and the others under TFDI.

WHEREFORE, the Petition is DENIED. The Decision dated November

24,2009 and Resolution dated May 10, 2012 of the Court of Appeals in CA-
G.R. SP No. 01853-MIN are AFFIRMED.
Doctrine: Any piercing of the corporate veil must be done with caution. It
must be certain that the corporate fiction was misused to such an extent that
injustice, fraud, or crime was committed against another, in disregard of
rights. Moreover, the wrongdoing must be clearly and convincingly
established.

Case Title: California Manufacturing Company, Inc. vs. Advanced

Technology System, Inc., G.R. No. 202454, April 25, 2017 (J. Sereno)

Facts: In August 200 I, CMCI leased from ATSI a Prodopak machine which
was used to pack products in 20-ml. pouches. The parties agreed to a
monthly rental of ₱98,000 exclusive of tax. Upon receipt of an open purchase
order on 6 August 2001, ATSI delivered the machine to CMCI's plant at
Gateway Industrial Park, General Trias, Cavite.

In November 2003, ATSI filed a Complaint for Sum of Money against CMCI
to collect unpaid rentals for the months of June, July, August, and September
2003.

CMCI moved for the dismissal of the complaint on the ground of

extinguishment of obligation through legal compensation. However, the
motion was denied.

CMCI averred that ATSI was one and the same with Processing Partners
and Packaging Corporation (PPPC), which was a toll packer of CMCI
products. To support its allegation, CMCI submitted copies of the Articles of
Incorporation and General Information Sheets (GIS) of the two corporations.
CMCI pointed out that ATSI was even a stockholder of PPPC as shown in
the latter's GIS.

After trial, the RTC rendered a Decision in favor of ATSI.

On appeal by CMCI, the CA affirmed the trial court's ruling.

Issue: Whether ATSI is distinct and separate from PPPC, or from the
Spouses Celones.
Held: Yes, ATSI is distinct and separate from PPPC, or from the Spouses
Celones.

Any piercing of the corporate veil must be done with caution. It must be
certain that the corporate fiction was misused to such an extent that injustice,
fraud, or crime was committed against another, in disregard of rights.
Moreover, the wrongdoing must be clearly and convincingly established.

CMCI 's alter ego theory rests on the alleged interlocking boards of directors
and stock ownership of the two corporations. The Court, however, sustained
the CA’s rejection of this theory based on the settled rule that mere
ownership by a single stockholder of even all or nearly all the capital stocks
of a corporation, by itself, is not sufficient ground to disregard the corporate
veil. The instrumentality or control test of the alter ego doctrine requires not
mere majority or complete stock control, but complete domination of
finances, policy and business practice with respect to the transaction in
question.

WHEREFORE, the Decision dated 25 August 2011 and Resolution dated 21

June 2012 issued by the Court of Appeals in CA-G.R. CV No. 94409
are AFFIRMED. The instant Petition is DENIED for lack of merit.
Doctrine: Whenever necessary for the interest of the public or for the
protection of enforcement of their rights, the notion of legal entity should not
and is not to be used to defeat public convenience, justify wrong, protect
fraud or defend crime.

Case Title: Gold Line Tours, Inc. vs. Heirs of Maria Concepcion Lacsa,
G.R. No. 159108, June 18, 2012 (J. Bersamin)

Facts: On August 2, 1993, Ma. Concepcion Lacsa and her sister, Miriam
Lacsa (Miriam), boarded a Goldline passenger bus owned and operated by
Travel & Tours Advisers, Inc. They were enroute from Sorsogon to Cubao,
Quezon City. Upon reaching the highway at Barangay San Agustin in Pili,
Camarines Sur, the Goldline bus, driven by Rene Abania, collided with a
passenger jeepney coming from the opposite direction and driven by
Alejandro Belbis. As a result, a metal part of the jeepney was detached and
struck Concepcion in the chest, causing her instant death.

On August 23, 1993, Concepcion’s heirs, represented by Teodoro Lacsa,

instituted in the RTC a suit against Travel & Tours Advisers Inc. and Abania
to recover damages arising from breach of contract of carriage.

The defendants blamed the death of Concepcion to the recklessness of

Bilbes as the driver of the jeepney, and of its operator, Salvador Romano;
and that they had consequently brought a third-party complaint against the
latter.

Issue: Did the CA rightly find and conclude that the RTC did not gravely
abuse its discretion in denying petitioner’s verified third-party claim?

Held: Yes, the CA is correct in finding and concluding that the RTC did not
gravely abuse its discretion in denying petitioner’s verified third-party claim

The Court is not persuaded by the proposition of the third party claimant that
a corporation has an existence separate and/or distinct from its members
insofar as this case at bar is concerned, for the reason that whenever
necessary for the interest of the public or for the protection of enforcement
of their rights, the notion of legal entity should not and is not to be used to
defeat public convenience, justify wrong, protect fraud or defend crime.

The RTC had sufficient factual basis to find that petitioner and Travel and
Tours Advisers, Inc. were one and the same entity, specifically:– (a)
documents submitted by petitioner in the RTC showing that William Cheng,
who claimed to be the operator of Travel and Tours Advisers, Inc., was also
the President/Manager and an incorporator of the petitioner; and (b) Travel
and Tours Advisers, Inc. had been known in Sorsogon as Goldline.

The RTC thus rightly ruled that petitioner might not be shielded from liability
under the final judgment through the use of the doctrine of separate
corporate identity. Truly, this fiction of law could not be employed to defeat
the ends of justice.

WHEREFORE, the Court DENIES the petition for review on certiorari, and
AFFIRMS the decision promulgated by the Court of Appeals on October 30,
2002. Costs of suit to be paid by petitioner.
Doctrine: A subsidiary company's separate corporate personality may be
disregarded only when the evidence shows that such separate personality
was being used by its parent or holding corporation to perpetrate a fraud or
evade an existing obligation. Concomitantly, employees of a corporation
have no cause of action for labor-related claims against another unaffiliated
corporation, which does not exercise control over them.

Case Title: Maricalum Mining Corp. vs. Florentino, GR. Nos. 221813 and
222723, July 23, 2018 (J. Gesmundo)

Facts: On June 1, 2001, Maricalum Mining's Vice President and Resident

Manager Jesus H. Bermejo wrote a Memorandum to the cooperatives
informing them that Maricalum Mining has decided to stop its mining and
milling operations effective July 1, 2001 in order to avert continuing losses
brought about by the low metal prices and high cost of production.

On September 23, 2010, some of Maricalum Mining's workers, including

complainants, and some of Sipalay General Hospital's employees jointly filed
a Complaint15 with the LA against G Holdings, its president, and officer-in-
charge, and the cooperatives and its officers for illegal dismissal,
underpayment and nonpayment of salaries, underpayment of overtime pay,
underpayment of premium pay for holiday, nonpayment of separation pay,
underpayment of holiday pay, nonpayment of service incentive leave pay,
nonpayment of vacation and sick leave, nonpayment of 13th month pay,
moral and exemplary damages, and attorneys fees.

On December 2, 2010, complainants and CeMPC Chairman Alejandro H.

Sitchon surprisingly filed his complaint for illegal dismissal and
corresponding monetary claims with the LA against G Holdings, its officer-
in-charge and CeMPC.

Issue: Whether the CA erred in upholding the NLRC's Decision declaring

Maricalum Mining as the proper party liable to pay the monetary awards in
favor of complainants.
Held: No, the CA did not err in upholding the NLRC's Decision declaring
Maricalum Mining as the proper party liable to pay the monetary awards in
favor of complainants.

While the veil of corporate fiction may be pierced under certain instances,
mere ownership of a subsidiary does not justify the imposition of liability on
the parent company. It must further appear that to recognize a parent and a
subsidiary as separate entities would aid in the consummation of a wrong.
Thus, a holding corporation has a separate corporate existence and is to be
treated as a separate entity; unless the facts show that such separate
corporate existence is a mere sham, or has been used as an instrument for
concealing the truth.

Piercing the corporate veil based on the alter ego theory requires the
concurrence of three elements: control of the corporation by the stockholder
or parent corporation, fraud or fundamental unfairness imposed on the
plaintiff, and harm or damage caused to the plaintiff by the fraudulent or
unfair act of the corporation. The absence of any of these elements prevents
piercing the corporate veil.

In the instant case, there is no doubt that G Holdings-being the majority and
controlling stockholder-had been exercising significant control over
Maricalum Mining.

However, mere presence of control and full ownership of a parent over a

subsidiary is not enough to pierce the veil of corporate fiction.

Secondly, the complainants did not satisfy the requisite quantum of evidence
to prove fraud on the part of G Holdings. They merely offered allegations and
suppositions that, since Maricalum Mining's assets appear to be
continuously depleting and that the same corporation is a subsidiary, G
Holdings could have been guilty of fraud. As emphasized earlier, bare
allegations do not prove anything. There must be proof that fraud-not the
inevitable effects of a previously executed and valid contract such as the
PSA-was the cause of the latter's total asset depletion. To be clear, the
presence of control per se is not enough to justify the piercing of the
corporate veil.
Finally, complainants have not yet even suffered any monetary injury. They
have yet to enforce their claims against Maricalum Mining. It is apparent that
complainants are merely anxious that their monetary awards will not be
satisfied because the assets of Maricalum Mining were allegedly transferred
surreptitiously to G Holdings. However, as discussed earlier, since
complainants failed to show that G Holdings's mere exercise of control had
a clear hand in the depletion of Maricalum Mining's assets, no proximate
cause was successfully established. The transfer of assets was pursuant to
a valid and legal PSA between G Holdings and APT.

Accordingly, complainants failed to satisfy the second and third tests to justify
the application of the alter ego theory. This inevitably shows that the CA
committed no reversible error in upholding the NLRC's Decision declaring
Maricalum Mining as the proper party liable to pay the monetary awards in
favor of complainants.

WHEREFORE, the Court AFFIRMS in toto the October 29, 2014 Decision of
the Court of Appeals in CA-G.R. SP No. 06835.
Doctrine: While a corporation may exist for any lawful purpose, the law will
regard it as an association of persons or, in case of two corporations, merge
them into one, when its corporate legal entity is used as a cloak for fraud or
illegality.

Case Title: Rivera vs. United Laboratories, Inc. GR. No. 155639, April
22, 2009 (J. Brion)

Facts: In 1988, Rivera completed 30 years of service and UNILAB retired

her pursuant to the terms of the plan effective December 31, 1988.

At Rivera's request, UNILAB allowed her to continue working for the

company; she was even promoted to the position of Assistant Vice-President
on January 1, 1989. She rendered service to the company in this capacity
until the end of 1992, at which time, Rivera retired from employment with the
company (as distinguished from retirement from the plan).

From 1993 to 1994, Rivera served as a personal consultant under contract

with the Active Research and Management Corporation (ARMCO) in 1993
and with Fil-Asia Business Consultants (Fil-Asia) in 1994. These are
UNILAB’s sister companies which assigned Rivera to render service
involving UNILAB.

On December 16, 1992, the company amended its retirement plan,

providing, among others, for an increase in retirement benefits from one (1)
month to one-and-a-half (1.5) months of terminal basic salary for every year
of service.

In a letter dated January 7, 1995 to UNILAB, Rivera asked that her retirement
benefits be increased in accordance with the amended retirement program
based on her December 31, 1992 terminal basic salary, multiplied by her
thirty four (34) years of service with the company. However, her request was
denied.

On August 9, 1996, Rivera sought relief from the NLRC in an action against
UNILAB for recovery of unpaid retirement pay differential.
The Labor Arbiter found that Rivera was not entitled to the upgraded benefits
under the company's amended retirement plan. The NLRC denied her
appeal.

Rivera elevated the case to the Court of Appeals by way of a petition for
certiorari. The CA ruled in favor of Rivera.

Rivera posits that UNILAB, ARMCO and FIL-ASIA are one and the same
corporation. She opines that the "veil of corporate fiction may be pierced
when the same is made as a shield to confuse the legitimate issues." She
maintains that when her "agreement" with FIL-ASIA expired on December
31, 1994, she had completed thirty six (36) years, eight (8) months and
twenty four (24) days of continuous service with UNILAB.

Issue: Whether the doctrine of piercing the veil of corporate fiction is

applicable in this case.

Held: No, the doctrine of piercing the veil of corporate fiction is not applicable
in this case.

While a corporation may exist for any lawful purpose, the law will regard it as
an association of persons or, in case of two corporations, merge them into
one, when its corporate legal entity is used as a cloak for fraud or illegality.

To disregard the separate juridical personality of a corporation, the

wrongdoing must be established clearly and convincingly. It cannot be
presumed.

In this case, there is no basis in the present case to conclude that UNILAB
committed any fraud or illegality in employing a retired employee whose
knowledge, experience and expertise the company recognized, as an
employee or as a consultant. What UNILAB did, in itself, is not an illegality;
on the contrary, it is a recognized practice in this country, a fact which the
Court took judicial notice of, for companies to continue to avail of the
expertise and experience of their retired employees by retaining them either
as employees or as consultants.
WHEREFORE, premises considered, we hereby DENY the petition and
DISMISS the claim of Januaria A. Rivera for unpaid retirement pay
differential for lack of merit. Costs against the petitioner.
Doctrine: While the conditions for the disregard of the juridical entity may
vary, the following are 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.

Case Title: Heirs of Fe Tan Uy vs. International Exchange Bank, GR. No.
166282, February 13, 2013 (J. Mendoza)

Facts: Promissory notes were made pursuant to a Letter-Agreement

between iBank and Hammer, represented by its President and General
Manager, Manuel Chua, granting Hammer a P 25 Million-Peso Omnibus
Line. The loans were secured by a P 9 Million-Peso Real Estate Mortgage
executed on July 1, 1997 by Goldkey Development Corporation over several
of its properties and a P 25 Million-Peso Surety Agreement signed by Chua
and his wife, Fe Tan Uy, on April 15, 1996.

As of October 28, 1997, Hammer had an outstanding obligation of

₱25,420,177.62 to iBank. Hammer defaulted in the payment of its loans,
prompting iBank to foreclose on Goldkey’s third-party Real Estate Mortgage.
The mortgaged properties were sold for P 12 million during the foreclosure
sale, leaving an unpaid balance of P 13,420,177.62. For failure of Hammer
to pay the deficiency, iBank filed a Complaint for sum of money on December
16, 1997 against Hammer, Chua, Uy, and Goldkey before the Regional Trial
Court, Makati City (RTC).

Issues:
1. Whether Uy can be held liable to iBank for the loan obligation of Hammer
as an officer and stockholder of the said corporation;

2. Whether Goldkey can be held liable for the obligation of Hammer for being
a mere alter ego of the latter.
Held:
1. No, Uy cannot can be held liable to iBank for the loan obligation of
Hammer as an officer and stockholder of the said corporation

A director, officer or employee of a corporation is generally not held

personally liable for obligations incurred by the corporation. Nevertheless,
this legal fiction may be disregarded if it is used as a means to perpetrate
fraud or an illegal act, or as a vehicle for the evasion of an existing
obligation, the circumvention of statutes, or to confuse legitimate issues.

Before a director or officer of a corporation can be held personally liable

for corporate obligations, however, the following requisites must concur:
(1) the complainant must allege in the complaint that the director or officer
assented to patently unlawful acts of the corporation, or that the officer
was guilty of gross negligence or bad faith; and (2) the complainant must
clearly and convincingly prove such unlawful acts, negligence or bad faith.

In this case, petitioners are correct to argue that it was not alleged, much
less proven, that Uy committed an act as an officer of Hammer that would
permit the piercing of the corporate veil.

2. Yes, Goldkey can be held liable for the obligation of Hammer for being a
mere alter ego of the latter.

While the conditions for the disregard of the juridical entity may vary, the
following are 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.

These factors are unquestionably present in the case of Goldkey and

Hammer, as observed by the RTC.
WHEREFORE, the petition are PARTLY GRANTED. The August 16, 2004
Decision and the December 2, 2004 Resolution of the Court of Appeals in
CA-G.R. CV No. 69817, are hereby MODIFIED. Fe Tan Uy is released from
any liability arising from the debts incurred by Hammer from iBank. Hammer
Garments Corporation, Manuel Chua Uy Po Tiong and Goldkey
Development Corporation are jointly and severally liable to pay International
Exchange Bank the sum of ₱13,420,177.62 representing the unpaid loan
obligation of Hammer as of December 12, 1997 plus interest. No costs.
Doctrine: 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.

Case Title: Concept Builders, Inc. vs. NLRC, GR. No. 108734, May 29,
1996 (J. Hermosisima, Jr.)

Facts: Petitioner Concept Builders, Inc., a domestic corporation, with

principal office at 355 Maysan Road, Valenzuela, Metro Manila, is engaged
in the construction business. Private respondents were employed by said
company as laborers, carpenters and riggers.

On November, 1981, private respondents were served individual written

notices of termination of employment by petitioner, effective on November
30, 1981. It was stated in the individual notices that their contracts of
employment had expired and the project in which they were hired had been
completed.

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.

Issue: Whether the NLRC committed grave abuse of discretion when it

affirmed the break-open order issued by the Labor Arbiter.

Held: No, the NLRC did not commit any grave abuse of discretion when it
affirmed the break-open order issued by the Labor Arbiter.

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.
In this case, the petitioner and the third-party claimant shared the same
address and/or premises, as evidenced by their information sheets which
were both filed by the same Virgilio O. Casino.

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.

WHEREFORE, the petition is DISMISSED and the assailed resolutions of

the NLRC, dated April 23, 1992 and December 3, 1992, are AFFIRMED.
Doctrine: If used to perform legitimate functions, a subsidiary's separate
existence may be respected, and the liability of the parent corporation as well
as the subsidiary will be confined to those arising in their respective
business. The courts may in the exercise of judicial discretion step in to
prevent the abuses of separate entity privilege and pierce the veil of
corporate entity.

Case Title: PNB vs. Ritratto Group, Inc. GR. No. 142616, July 31, 2001
(J. Kapunan)

Facts: PNB International Finance Ltd. (PNB-IFL) a subsidiary company of

PNB, organized and doing business in Hong Kong, extended a letter of credit
in favor of the respondents in the amount of US$300,000.00 secured by real
estate mortgages constituted over four (4) parcels of land in Makati City.

Due to their outstanding obligations amounting to US$1,497,274.70, PNB-

IFL, through its attorney-in-fact PNB, notified the respondents of the
foreclosure of all the real estate mortgages and that the properties subject
thereof were to be sold at a public auction on May 27, 1999 at the Makati
City Hall.

Respondents filed a complaint for injunction with prayer for the issuance of
a writ of preliminary injunction and/or temporary restraining order before the
Regional Trial Court of Makati.

On June 30, 1999, the trial court judge issued an Order for the issuance of a
writ of preliminary injunction, which writ was correspondingly issued on July
14, 1999. On October 4, 1999, the motion to dismiss was denied by the trial
court judge for lack of merit.

Petitioner, thereafter, in a petition for certiorari and prohibition assailed the

issuance of the writ of preliminary injunction before the Court of Appeals. In
the impugned decision,1 the appellate court dismissed the petition.

Issue: Whether the suit against the defendant PNB is a suit against PNB-
IFL.
Held: No, the suit against the defendant PNB is not a suit against PNB-IFL.

If used to perform legitimate functions, a subsidiary's separate existence may

be respected, and the liability of the parent corporation as well as the
subsidiary will be confined to those arising in their respective business. The
courts may in the exercise of judicial discretion step in to prevent the abuses
of separate entity privilege and pierce the veil of corporate entity.

Aside from the fact that PNB-IFL is a wholly owned subsidiary of petitioner
PNB, there is no showing of the indicative factors that the former corporation
is a mere instrumentality of the latter are present.

In any case, the parent-subsidiary relationship between PNB and PNB-IFL

is not the significant legal relationship involved in this case since the
petitioner was not sued because it is the parent company of PNB-IFL.
Rather, the petitioner was sued because it acted as an attorney-in-fact of
PNB-IFL in initiating the foreclosure proceedings. A suit against an agent
cannot without compelling reasons be considered a suit against the principal.

IN VIEW OF THE FOREGOING, the petition is hereby GRANTED. The

assailed decision of the Court of Appeals is hereby REVERSED. The Orders
dated June 30, 1999 and October 4, 1999 of the Regional Trial Court of
Makati, Branch 147 in Civil Case No. 99-1037 are hereby ANNULLED and
SET ASIDE and the complaint in said case DISMISSED.
Doctrine: The obligations incurred by the corporate officers, or other
persons acting as corporate agents, are the direct accountabilities of the
corporation they represent, and not theirs. Thus, a director, officer or
employee of a corporation is generally not held personally liable for
obligations incurred by the corporation; it is only in exceptional
circumstances that solidary liability will attach to them.

Case Title: WPM International Trading, Inc. vs. Labayen, GR. No.
182770, September 17, 2014 (J. Brion)

Facts: Sometime in 1990, WPM entered into a management agreement with

the respondent Fe Corazon Labayen, the owner of H.B.O. Systems
Consultants, by virtue of which the respondent was authorized to operate,
manage and rehabilitate Quickbite, a restaurant owned and operated by
WPM. As part of her tasks, the respondent looked for a contractor who would
renovate the two existing Quickbite outlets in Divisoria, Manila and Lepanto
St., University Belt, Manila. Pursuant to the agreement, the respondent
engaged the services of CLN Engineering Services (CLN) to renovate
Quickbite-Divisoria at the cost of ₱432,876.02.

Quickbite-Divisoria’s renovation was completed and its possession was

delivered to the respondent. However, out of the ₱432,876.02 renovation
cost, only the amount of ₱320,000.00 was paid to CLN, leaving a balance of
₱112,876.02.

CLN filed a complaint for sum of money and damages before the RTC
against the respondent and Manlapaz, which was docketed as Civil Case
No. Q-90-7013. CLN later amended the complaint to exclude Manlapaz as
defendant.

The RTC found the respondent liable to pay CLN actual damages.

Thereafter, the respondent instituted a complaint for damages against the

petitioners, WPM and Manlapaz. She alleged that that it was actually
Manlapaz and Neri who agreed on the terms and conditions of the
agreement.
The RTC held that the respondent is entitled to indemnity from Manlapaz.
The RTC found that based on the records, there is a clear indication that
WPM is a mere instrumentality or business conduit of Manlapaz and as such,
WPM and Manlapaz are considered one and the same.

The CA affirmed, with modification on the award of attorney’s fees, the

decision of the RTC.

Issue: Whether WPM is a mere instrumentality, alter-ego, and business

conduit of Manlapaz.

Held: No, WPM is not a mere instrumentality, alter-ego, and business

conduit of Manlapaz.

The obligations incurred by the corporate officers, or other persons acting as

corporate agents, are the direct accountabilities of the corporation they
represent, and not theirs. Thus, a director, officer or employee of a
corporation is generally not held personally liable for obligations incurred by
the corporation; it is only in exceptional circumstances that solidary liability
will attach to them.

In the present case, aside from the fact that Manlapaz was the principal
stockholder of WPM, records do not show that WPM was organized and
controlled, and its affairs conducted in a manner that made it merely an
instrumentality, agency, conduit or adjunct of Manlapaz.

Likewise, the records of the case do not support the lower courts’ finding that
Manlapaz had control or domination over WPM or its finances. That
Manlapaz concurrently held the positions of president, chairman and
treasurer, or that the Manlapaz’s residence is the registered principal office
of WPM, are insufficient considerations to prove that he had exercised
absolute control over WPM.

Moreover, the respondent failed to prove that Manlapaz, acting as president,

had absolute control over WPM. Even granting that he exercised a certain
degree of control over the finances, policies and practices of WPM, in view
of his position as president, chairman and treasurer of the corporation, such
control does not necessarily warrant piercing the veil of corporate fiction
since there was not a single proof that WPM was formed to defraud CLN or
the respondent, or that Manlapaz was guilty of bad faith or fraud.

The Court also observed that the CA failed to demonstrate how the separate
and distinct personality of WPM was used by Manlapaz to defeat the
respondent’s right for reimbursement. Neither was there any showing that
WPM attempted to avoid liability or had no property against which to
proceed.

Since no harm could be said to have been proximately caused by Manlapaz

for which the latter could be held solidarily liable with WPM, and considering
that there was no proof that WPM had insufficient funds, there was no
sufficient justification for the RTC and the CA to have ruled that Manlapaz
should be held jointly and severally liable to the respondent for the amount
she paid to CLN. Hence, only WPM is liable to indemnify the respondent.

WHEREFORE, in light of the foregoing, the decision dated September 28,

2007 of the Court of Appeals in CA-G.R. CV No. 68289 is MODIFIED and
petitioner Warlito P. Manlapaz is ABSOLVED from any liability under the
renovation agreement.
Doctrine: Outsider reverse piercing occurs when a party with a claim against
an individual or corporation attempts to be repaid with assets of a corporation
owned or substantially controlled by the defendant. In contrast, in insider
reverse piercing, the controlling members will attempt to ignore the corporate
fiction in order to take advantage of a benefit available to the corporation,
such as an interest in a lawsuit or protection of personal assets.

Case Title: International Academy of Management and Economics

Incorporated vs. Litton and Co. Inc., GR. No. 191525, December 13, 2017
(CJ. Sereno)

Facts: Atty. Emmanuel T. Santos (Santos), a lessee to two (2) buildings

owned by Litton, owed the latter rental arrears as well as his share of the
payment of realty taxes.

Consequently, Litton filed a complaint for unlawful detainer against Santos

before the MeTC of Manila. The MeTC ruled in Litton’s favor and ordered
Santos to vacate A.I.D. Building and Litton Apartments and to pay various
sums of money representing unpaid arrears, realty taxes, penalty,
andattorney’s fees.

It appears however that the judgment was not executed. Litton subsequently
filed an action for revival of judgment, which was granted by the RTC.

The sheriff of the MeTC of Manila levied on a piece of real property registered
in the name of International Academy of Management and Economics
Incorporated (I/AME), in order to execute the judgment against Santos.

I/AME filed with Me TC a "Motion to Lift or Remove Annotations Inscribed in

TCT No. 187565 of the Register of Deeds of Makati City." I/AME claimed that
it has a separate and distinct personality from Santos; hence, its properties
should not be made to answer for the latter's liabilities. The motion was
denied.

Upon motion for reconsideration of I/AME, the Me TC reversed its earlier

ruling and ordered the cancellation of the annotations of levy as well as the
writ of execution. Litton then elevated the case to the RTC, which in turn
reversed the Order granting I/AME’s motion for reconsideration and
reinstated the original Order dated 29 October 2004.

I/AME then filed a petition with the CA to contest the judgment of the RTC,
which was eventually denied by the appellate court.

Issue: Whether petitioner is vulnerable to the piercing of its corporate veil.

Held: Yes, petitioner is vulnerable to the piercing of its corporate veil.

The Court agrees with the CA that Santos used I/AME as a means to defeat
judicial processes and to evade his obligation to Litton. Thus, even while
I/AME was not impleaded in the main case and yet was so named in a writ
of execution to satisfy a court judgment against Santos, it is vulnerable to the
piercing of its corporate veil.

Piercing the Corporate Veil may Apply to Non-stock Corporations

Since the law does not make a distinction between a stock and non-stock
corporation, neither should there be a distinction in case the doctrine of
piercing the veil of corporate fiction has to be applied. While I/AME is an
educational institution, it still is a registered corporation conducting its affairs
as such.

Piercing the Corporate Veil may Apply to Natural Persons

The piercing of the corporate veil may apply to corporations as well as natural
persons involved with corporations. This Court has held that the "corporate
mask may be lifted and the corporate veil may be pierced when a corporation
is just but the alter ego of a person or of another corporation."

Reverse corporate piercing has two (2) types: outsider reverse piercing and
insider reverse piercing. Outsider reverse piercing occurs when a party with
a claim against an individual or corporation attempts to be repaid with assets
of a corporation owned or substantially controlled by the defendant. In
contrast, in insider reverse piercing, the controlling members will attempt to
ignore the corporate fiction in order to take advantage of a benefit available
to the corporation, such as an interest in a lawsuit or protection of personal
assets.

Outsider reverse veil-piercing is applicable in the instant case. Litton, as

judgment creditor, seeks the Court's intervention to pierce the corporate veil
of I/AME in order to make its Makati real property answer for a judgment
against Santos, who formerly owned and still substantially controls I/AME.

Thus, the reverse piercing of the corporate veil of I/AME to enforce the levy
on execution of the Makati real property where the school now stands is
applied.

WHEREFORE, in view of the foregoing, the instant petition is DENIED. The

CA Decision in CA-G.R. SP No. 107727 dated 30 October 2009 and its
Resolution on 12 March 2010 are hereby AFFIRMED. The MeTC Order
dated 29 October 2004 is hereby REINSTATED.

Accordingly, the MeTC of Manila, Branch 2, is hereby DIRECTED to execute

with dispatch the MeTC Order dated 29 October 2004 against Santos.