DOCTRINE: A corporation is an artificial entity created by operation of law.

It possesses the right of succession and such powers, attributes, and

properties expressly authorized by law or incident to its existence. It has a
personality separate and distinct from that of its stockholders and from that
of other corporations to which it may be connected.

TITLE: ABOITIZ EQUITY v. CHIONGBIAN, G.R. No. 197530 July 9, 2014

(LEONEN, J.:)

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.

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. CAGLI threatened to pursue arbitration against AEV unless receipts
for the purported deliveries were made available.

ISSUE:
Whether or not CAGLI is liable

RULING:
The SC held that the favorable ruling CAGLI obtained from Cebu City RTC
Branch 10 was void on the ground of forum shopping, res judicata, and litis
pendentia.

Similarly, the SC held that AEV cannot be sued against because it was
merely a stockholder of ATSC. 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.
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.

A corporation is an artificial entity created by operation of law. It possesses

the right of succession and such powers, attributes, and properties
expressly authorized by law or incident to its existence. It has a personality
separate and distinct from that of its stockholders and from that of other
corporations to which it may be connected. As a consequence of its 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

A corporation is invested by law with a personality separate from that of its

stockholders or members. It has a personality separate and distinct from
those of the persons composing it as well as from that of any other entity to
which it may be related. Mere ownership by a single stockholder or by
another corporation of all or nearly all of the capital stock of a corporation is
not in itself sufficient ground for disregarding the separate corporate
personality. A corporation’s authority to act and its liability for its actions are
separate and apart from the individuals who own it.

DOCTRINE: To peirce the veil of corporate fiction, there should be clear

and convincingly proof that fraud, illegality or inequality has been
committed against third persons.
TITLE: EMERTIA G. MALIXI v. MEXICALI PHILIPPINES AND/OR
FRANCESCA MABANTAG.R. No. 205061, June 08, 2016, (DEL
CASTILLO, J.:)

FACTS:
Petitioner alleged that on August 12, 2008, she was hired by respondents
as a team leader assigned at the delivery service, receiving a daily wage of
Three Hundred Eighty Two Pesos (P382.00) sans employment contract
and identification card (ID). 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 was
apprised that her monthly salary as the new store manager would be
Fifteen Thousand Pesos (P15,000,00) with service charge, free meal and
side tip. She then subsequently submitted a resignation letter7 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, John Pontero (Pontero), for the sexual advances
made against her during Pontero's visits at Alabang branch.8 When she
refused to sign the end-of-contract letter, Mexicali's administrative officer,
Ding Luna (Luna), on December 15, 2008, personally went to the branch
and caused the signing of the same. Upon her vehement refusal to sign,
she was informed by Luna that it was her last day of work.

When malixi request to sign, the company’s administrative officer, Ding

Luna personally went to tge branch and caused the signing of the same.
Upon her vehement refusal to sign, luna informed her that it was last day of
work.

Respondent denied responsibility over malixi’s dismissal employed by

Calexico which is a separate and distinct corporation.
Petitioner admitted having resigned from Mexicali, but claimed that it was a
condition for her promotion as store manager at the company’s ATC brach.
Despite her resignation, she remained to be an employee of Mexicali.

ISSUE:
WON Mexicali and Calexico are one and the same

RULING:
No, Malixi- Mexicali and Calexico are one and the same and mexcali was
still her employer upon her transfer to Calixico since she was hired and
dismissed by mexicali’s officers and that Mexicali exercised the power of
control over her performance.

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."32 Clear and
convincing evidence is needed to warrant the application of the doctrine of
piercing the veil of corporate fiction,33 In our view, the Labor Arbiter failed
to provide a clear justification for the application of the doctrine.

The Articles of Incorporation and By-Laws of both corporations show that

they have distinct business locations and distinct business purposes. It can
also be gleaned therein that they have a different set of incorporators or
directors since only two out of the five directors of Mexicali are also
directors of Calexico. 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.34 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.35 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.

DOCTRINE: In order determine the existence of independent

contractorship, it is necessary to establish that the contractor carries a
distinct and independent business, and undertakes to perform work on its
own account and under its responsibility and pursuant to its own manner
and method, without the control of the principal, except as to the result; that
the contractor has substantial capital or investment.

TITLE: VICMAR DEV. CORP VS ELACOSA

G.R. No. 202215, December 09, 2015 (DEL CASTILLO, J.:)

FACTS :
Respondents alleged that Vicmar, a domestic corporation engaged in
manufacturing of plywood for export and for local sale. They averred that
Vicmar has two branches, Top Forest Developers, Incorporated (TFDI) and
Greenwood International Industries, Incorporated (GUI) located in the same
compound where Vicmar operated. According to respondents, Vicmar
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.
Respondents claimed that they were illegally dismissed after "vicmar
learned that they instituted the subject Complaint through the simple
expedience of not being scheduled for work. Even those persons
associated with them were dismissed. They also asserted that Vicmar did
not comply with the twin notice requirement in dismissing employees

Respondents contended that while Vicmar, TFDI and Gin were separately
registered with the SEC. they were involved in the same business, located
in the same compound, owned by one person, had one resident manager,
and one and the same administrative department, personnel and finance
sections. They claimed that the employees of these companies were
identified as employees of Vicmar even if they were assigned in TFDI or
GIII

ISSUE:
WON Vicmar TFDI and Gin can be consdiered as one entity

HELD:
The Court also gives merit to the finding of the CA that Vicmar is the
employer of respondents despite the allegations that a number of them
were assigned to the branches of Vicmar. 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.

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.

DOCTRINE: The doctrine of piercing the corporate veil applies only in three
(3) basic areas, namely: 1) defeat of public convenience as when the
corporate fiction is used as a 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

CALIFORNIA MANUFACTURING COMPANY, INC., VS. ADVANCED

TECHNOLOGY SYSTEM, INC., (SERENO, C.J.:)

FACTS:
CMCI leased from ATSI a Prodopak machine which was used to pack
products in 20-ml. pouches.[5] The parties agreed to a monthly rental of
P98,000 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 on 8 August 2001.

November 2003, ATSI filed a Complaint for Sum of Money[6] against CMCI
to collect unpaid rentals for the months of June, July, August, and
September 2003. ATSI alleged that CMCI was consistently paying the rents
until June 2003 when the latter defaulted on its obligation without just
cause. ATSI also claimed that CMCI ignored all the billing statements and
its demand letter. Hence, in addition to the unpaid rents ATSI sought
payment for the contingent attorney's fee equivalent to 30% of the
judgment award.

Aside from the absence of a board resolution issued by ATSI, the CA

observed that the letter dated 30 July 2001 clearly showed that Felicisima's
proposal to effect the offsetting of debts was limited to the obligation of
PPPC. The appellate court thus sustained the trial court's finding that ATSI
was not bound by Felicisima's conduct.

The trial court ruled that legal compensation did not apply because PPPC
had a separate legal personality from its individual stockholders, the
Spouses Celones, and ATSI.

Moreover, the CA rejected CMCI's argument that ATSI is barred by

estoppel as it found no indication that ATSI had created any appearance of
false fact. CA also held that estoppel did not apply to PPPC because the
latter was not even a party to this case.

The CA, however, deleted the trial court's award of attorney's fees and
costs of litigation in favor of ATSI as it found no discussion in the body of
the decision of the factual and legal justification for the award.

ISSUE:
Whether the CA erred in affirming the ruling of the RTC that legal
compensation between ATSI's claim against CMCI

RULING:
We affirm the CA Decision in toto.

CMCI argues that both the RTC and the CA overlooked the circumstances
that it has proven to justify the piercing of corporate veil in this case, i.e., (1)
the interlocking board of directors, incorporators, and majority stockholder
of PPPC and ATSI; (2) control of the two corporations by the Spouses
Celones; and (3) the two corporations were mere alter egos or business
conduits of each other. CMCI now asks us to disregard the separate
corporate personalities of ATSI and PPPC based on those circumstances
and to enter judgment in favor of the application of legal compensation.
Whether one corporation is merely an alter ego of another, a sham or
subterfuge, and whether the requisite quantum of evidence has been
adduced to warrant the puncturing of the corporate veil are questions of
fact. Relevant to this point is the settled rule that in a petition for review on
certiorari like this case, this Court's jurisdiction is limited to reviewing errors
of law in the absence of any showing that the factual findings complained of
are devoid of support in the records or are glaringly erroneous. This rule
alone warrants the denial of the petition, which essentially asks us to
reevaluate the evidence adduced by the parties and the credibility of the
witnesses presented.

DOCTRINE: The corporation may not be heard to say that it has a

personality separate and distinct from its members, because to allow it to
do so would be to sanction the use of fiction of corporate entity as a shield
to further an end subversive of justice.

TITLE: GOLD LINE TOURS, INC. VS. HEIRS OF MARIA CONCEPCION

LACSA, G.R. NO. 159108 JUNE 18, 2012 (BERSAMIN, J.:)

FACTS:
Ma. Concepcion Lacsa Concepcion boarded a Gold Line passenger bus
owned and operated by Travel and Tours Advisers, Inc. Before reaching
their destination, the Gold line bus collided with a passenger jeepney and
as a result , a metal part of the jeepney was detached and struck
Concepcion in the chest, causing her instant death. Then, Concepcion
heirs, represented by Teodoro Lacsa, instituted in the RTC a suit against
Travel and Tours Adviser’s Inc., to recover damages arising from breach of
contract of carriage.

The RTC ruled in favor of the heirs of Concepcion and thereafter, Gold line
appealed the decision to the CA but the CA dismissed the appeal for failure
of the defendants to pay the docket and other lawful fees within the
required period as provided in Rule 41, Section 4 of the Rules of Court. The
dismissal became final.

ISSUE:
WON the proposition of the third party claimant by the petitioner where
Travel and Tours Advises Inc., has an existence separate and/or distinct
from Gold Line Tours Inc.

RULING:
The SC denied the petition for review on certiorari; and affirmed the
decision promulgated by the CA, the two corporations are liable to the
death of Ma. Concepcion.

Where the main purpose in forming the corporation was to evade one’s
subsidiary liability for damages in a criminal case, the corporation may not
be heard to say that it has a personality separate and distinct from its
members, because to allow it to do so would be to sanction to the use of
fiction of corporate entity as a shield to further an end subversive of justice.

This is what the third party claimant wants to do including the defendants in
this case, to use the separate and distinct personality of the two
corporations as a shield to further an end subversive of justice by avoiding
the execution of a final judgment of the court. The RTC thus rightly ruled
that petitioner may not be shielded from liability under final judgment
through the use of the doctrine of separate corporate identity. Truly, this
fiction of law cannot be employed to defeat the ends of justice.

DOCTRINE: The doctrine of piercing the corporate veil applies only in three
(3) basic areas: Defeat of public convenience as when the corporate fiction
is used as a vehicle for the evasion of an existing obligation, Fraud cases,
Alter ego cases ○ Complainants mainly harp their cause on the alter ego
theory.

TITLE: Maricalum Mining Corp. vs. Florentino, G.R. No. 221813, July
23, 2018 (GESMUNDO, J.:)

FACTS:
The Philippine National Bank (PNB, a former government-owned-and-
controlled corporation) and the Development Bank of the Philippines (DBP)
transferred its ownership of Maricalum Mining to the National Government
for disposition or privatization because it had become a nonperforming
asset. National Government thru the Asset Privatization Trust (APT)
executed a Purchase and Sale Agreement (PSA) with G Holdings G
Holding bought 90% of Maricalum Mining's shares and financial claims in
the form of company notes.

Concomitantly, G Holdings also assumed Maricalum Mining's liabilities in

the form of company notes. Upon the signing of the PSA and paying the
stipulated down payment, G Holdings immediately took physical
possession of Maricalum's Sipalay Mining Complex, as well as its facilities,
and took full control of the latter's management and operations.
Subsequently, the Sipalay General Hospital, Inc. (Sipalay Hospital) was
duly incorporated to provide medical services and facilities to the general
public. Afterwards, some of Maricalum Mining's employees retired and
formed several manpower cooperatives (there were 5 in total) Each of the
cooperatives executed identical Memorandum of Agreements with
Maricalum wherein they will provide the latter with a steady supply of
workers, machinery and equipment for a monthly fee. Maricalum informed
the cooperatives that it decided to stop its mining and milling operations in
order to avert continuing losses brought about by the low metal prices and
high cost of production. The properties of Maricalum, which had been
mortgaged to secure the PNs, were extrajudicially foreclosed and
eventually sold to G Holdings as the highest bidder Some of Maricalum's
workers, including complainants, and some of Sipalay General Hospital's
employees jointly filed a Complaint with the LA against G Holdings for
illegal dismissal and other labor-related claims (Case 1) Complainants and
CeMPC (one of the cooperatives) Chairman Sitchon filed his complaint for
illegal dismissal and corresponding monetary claims with the LA against G
Holdings, its officer-in-charge and CeMP. Thereafter, the complaints were
consolidated by the LA. (Case 2) Complainants: Claimed that G holdings
had full control over them and their services were terminated by Maricalum
as part of its retrenchment program. They claimed that they were forced to
form a cooperative and they were "rehired" only after their respective
manpower cooperative services were formed.

ISSUES:
WON CA erred in allowing the piercing of the corporate veil against PET –

RULING:
YES, The doctrine of piercing the corporate veil applies only in three (3)
basic areas: Defeat of public convenience as when the corporate fiction is
used as a vehicle for the evasion of an existing obligation, Fraud cases,
Alter ego cases ○ Complainants mainly harp their cause on the alter ego
theory. Under this theory, piercing the veil of corporate fiction may be
allowed only if the following elements concur: Control-not mere stock
control, but complete domination-not only of finances, but of policy and
business practice in respect to the transaction attacked, must have been
such that the corporate entity as to this transaction had at the time no
separate mind, will or existence of its own; Such control must have been
used by the defendant to commit a fraud or a wrong, to perpetuate the
violation of a statutory or other positive legal duty, or a dishonest and an
unjust act in contravention of plaintiffs legal right; and the said control and
breach of duty must have proximately caused the injury or unjust loss
complained of. In relation to the elements above, SC laid down the
jurisprudential tests for piercing, to wit - (check notes for further discussion)
Control Test There is no doubt that G Holdings - being the majority and
controlling stockholder - had been exercising signifcant control over
Maricalum Mining. This is because this Court had already upheld the
validity and enforceability of the PSA between the APT and G Holdings
Fraud Test No clear and convincing evidence was presented by the
complainants to conclusively prove the presence of fraud on the part of G
Holdings. Harm Test

In the case at bench, complainants have not yet even suffered any
monetary injury. They have yet to enforce their claims against Maricalum.
Hence, in order for a parent corporation to be held liable for the obligations
or liabilities of its subsidiary, all three (3) tests must be satisfied. "Piercing
of the corporate veil" cannot be done when only one or two of the said tests
have been satisfied. Only one of the three (3) tests was met (particularly,
control). The complainants therein (who claimed to be employees of the
subsidiary) failed to prove that the parent purposely used the separate
corporate fiction of its subsidiary to defraud them; neither were
complainants able to show any harm inflicted upon them, which was
proximately caused by

the control of the parent over the subsidiary. In other words, while control
was undoubtedly present in this case, there was neither fraud done nor
harm inflicted. Hence, the complainants were held unable to proceed
against the parent corporation for supposed liabilities of its subsidiary, in
keeping with the principle of separate and distinct juridical personalities of
corporations
Wherefore, CA Affirmed. Leonen Dissent: DISSENT as to the ruling that
the corporate veil should not be pierced. I maintain that the doctrine of
piercing the corporate veil properly applies and that G Holdings, Inc. should
be held liable with Maricalum Mining Corporation G Holdings did not merely
own Maricalum Mining sa holding company. It had a say in its processes
and procedures. Thus, it cannot claim to be innocent. It cannot participate
in the illegal dismissal of employees and thereafter hide behind its separate
corporate personality to avoid the liability arising from it. The elements of
control, bad faith, and injury are present in the case at bar. Moreover,
assuming that the case does not fall within the purview of fraud or alter-ego
cases, the doctrine of piercing the corporate veil still applies when the
separate personality of the corporation is being used to "defeat public
convenience as when the corporate fiction is used as a vehicle for the
evasion of an existing obligation. It is established that the relations between
capital and labor are impressed with public interest, with the working class
usually at a disadvantage. Thus, in case of doubt, courts rule in favor of
labor.

DOCTRINE: The doctrine applies only when such corporate fiction is used
to defeat public convenience, justify wrong, protect fraud, or defend crime,
or when it is made as a shield to confuse the legitimate issues, or where a
corporation is the mere alter ego or business conduit of a person, or where
the corporation is so organized and controlled and its affairs are so
conducted as to make it merely an instrumentality, agency, conduit or
adjunct of another corporation.

TITLE: JANUARIA A. RIVERA, v. UNITED LABORATORIES, INC., G.R.

NO. 155639 April 22, 2009 (BRION, J.:)

FACTS:
In 1959, UNILAB adopted a comprehensive retirement plan (the plan or
retirement plan) supported by a retirement fund. Under the plan, a member
is compulsorily retired upon reaching the normal retirement date which is
the date when the member has reached age 60 or has completed 30years
of service, whichever comes first.
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, with a basic monthly salary of P50,034.00, and a fixed monthly
allowance of P8,900.00. 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).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.

ISSUE:
Whether or not UNILAB committed fraud or illegality in employing a retired
employee.

RULING:
No there is no basis in the present case to conclude that UNILAB any fraud
or illegality 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. This is the doctrine of piercing the veil of corporate fiction.
The doctrine applies only when such corporate fiction is used to defeat
public convenience, justify wrong, protect fraud, or defend crime, or when it
is made as a shield to confuse the legitimate issues, or where a corporation
is the mere alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs are so conducted
as to make it merely an instrumentality, agency, conduit or adjunct of
another corporation.

To disregard the separate juridical personality of a corporation, the

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

As in this cited case, we see 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. We note that Rivera had already been an
Assistant Vice President with UNILAB - an "old timer" in a senior position
based on the responsibilities she carried - when she entered into the
consultancy contracts. What UNILAB did, in itself, is not an illegality; on the
contrary, it is a recognized practice in this country, a fact we take 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. Nor can Rivera claim she had been
shortchanged, or in any manner prejudiced by her consultancy services
and her relationship with her principals, or placed in a disadvantaged
position that would merit special consideration from this Court. From the
totality of the evidence presented, she appears to have openly embraced
the consultancy services she was assigned, knowing fully well the
conditions under which she was serving, and receiving benefits that cannot
be described as negligible. Under these circumstances, we find it too late in
the day for her to complain that she was given a run-around as ARMCO
and FIL-ASIA were simply conduits of UNILAB, and we see no need to
engage in piercing the veil of these corporate entities that she
advocates.68

Thus, by the strict standards of law, we cannot grant Rivera's petition.

Interestingly, the same conclusion obtains if the case were to be viewed
solely from the ordinary norms of fairness. We go out of our way to say this
in light of what Rivera stated in her demand letter of January 7, 1995 to
UNILAB; she felt aggrieved because the retirement benefits she received
were less than what other employees - with less years of service, with
lower rates of pay, or with lower rank - received.69 Apparently, Rivera
failed to realize that she cannot compare herself with these other
employees because she and they were not in the same situation; these
other employees retired later and under retirement plan terms that, by then
and for various reasons not attributable to any company wrongdoing, had
been enhanced. Both in law and under the common concept of fairness,
there is inequitable treatment only if persons under the same situation or
circumstances are treated differently. Rivera was not so treated by
UNILAB; rather, she was given her just due under the specific rules that
applied to her. Hence, we cannot likewise recognize the validity of Rivera's
claim even from the point of view of justice administered according to
ordinary norms of fairness.
DOCTRINE: Basic is the rule in corporation law that a corporation is a
juridical entity which is vested with a legal personality separate and distinct
from those acting for and in its behalf and, in general, from the people
comprising it.

TITLE: HEIRS OF FE TAN UY (Represented by her heir, Mauling Uy

Lim), vs. INTERNATIONAL EXCHANGE BANK, G.R. No. 166282
February 13, 2013 (MENDOZA, J.:)

FACTS:
International Exchange Bank (iBank), granted loans to Hammer Garments
Corporation (Hammer), covered by promissory notes and deeds of
assignment P24,938,898.08. These were made pursuant to the Letter-
Agreement, dated March 23,1996, between iBank and Hammer,
represented by its President and General Manager, Manuel Chua (Chua)
a.k.a. Manuel Chua Uy Po Tiong, 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

(Goldkey) over several of its properties and a P 25 Million-Peso Surety
Agreement signed by Chua and his wife, Fe Tan Uy (Uy), on April 15,
1996.

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

P25,420,177.62 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).

In her separate answer, Uy claimed that she was not liable to iBank
because she never executed a surety agreement in favor of iBank.
Goldkey, on the other hand, also denies liability, averring that it acted only
as a third-party mortgagor and that it was a corporation separate and
distinct from Hammer.
Meanwhile, iBank applied for the issuance of a writ of preliminary
attachment which was granted by the RTC in its December 17, 1997 Order.

The Notice of Levy on Attachment of Real Properties, dated July 15, 1998,
covering the properties under the name of Goldkey, was sent by the sheriff
to the Registry of Deeds of Quezon City.

The RTC ruled in favor of iBank. While it made the pronouncement that the
signature of Uy on the Surety Agreement was a forgery, it nevertheless
held her liable for the outstanding obligation of Hammer because she was
an officer and stockholder of the said corporation. The RTC agreed with
Goldkey that as a third-party mortgagor, its liability was limited to the
properties mortgaged. It came to the conclusion, however, that Goldkey
and Hammer were one and the same entity for the following reasons: (1)
both were family corporations of Chua and Uy, with Chua as the President
and Chief Operating Officer; (2) both corporations shared the same office
and transacted business from the same place, (3) the assets of Hammer
and Goldkey were co-mingled; and (4) when Chua absconded, both
Hammer and Goldkey ceased to operate. As such, the piercing of the veil
of corporate fiction was warranted. Uy, as an officer and stockholder of
Hammer and Goldkey, was found liable to iBank together with Chua,
Hammer and Goldkey for the deficiency of P13,420,177.62.

ISSUE/S:
Whether or not there is guilt by association in those cases where the veil of
corporate fiction may be pierced and

Whether or not the "alter ego" theory in disregarding the corporate

personality of a corporation is applicable to Goldkey.

RULING:
The heirs of Uy argue that the latter could not be held liable for being
merely an officer of Hammer and Goldkey because it was not shown that
she had committed any actionable wrongor that she had participated in the
transaction between Hammer and iBank. They further claim that she had
cut all ties with Hammer and her husband long before the execution of the
loan.

The Court finds in favor of Uy.

Basic is the rule in corporation law that a corporation is a juridical entity
which is vested with a legal personality separate and distinct from those
acting for and in its behalf and, in general, from the people comprising it.
Following this principle, obligations incurred by the corporation, acting
through its directors, officers and employees, are its sole liabilities. 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. A reading of the complaint reveals
that with regard to Uy, iBank did not demand that... she be held liable for
the obligations of Hammer because she was a corporate officer who
committed bad faith or gross negligence in the performance of her duties
such that the lifting of the corporate mask would be merited. What the
complaint simply stated is that she, together with her errant husband Chua,
acted as surety of Hammer, as evidenced by her signature on the Surety
Agreement which was later found by the RTC to have been forged.

Considering that the only basis for holding Uy liable for the payment of the
loan was proven to be a falsified document, there was no sufficient
justification for the RTC to have ruled that Uy should be held jointly and
severally liable to iBank for the unpaid loan of Hammer.

Neither did the CA explain its affirmation of the RTC's ruling against Uy.

At most, Uy could have been charged with negligence in the performance

of her duties as treasurer of Hammer by allowing the company to contract a
loan despite its precarious financial position. Furthermore, if it was true, as
petitioners claim, that she no longer performed the... functions of a
treasurer, then she should have formally resigned as treasurer to isolate
herself from any liability that could result from her being an officer of the
corporation. Nonetheless, these shortcomings of Uy are not sufficient to
justify the piercing of the corporate veil which requires that the negligence
of the officer must be so gross that it could amount to bad faith and must be
established by clear and convincing evidence.

Goldkey contends that it cannot be held responsible for the obligations of

its stockholder, Chua Moreover, it theorizes that iBank is estopped from
expanding Goldkey's liability beyond the real estate mortgage. It adds that
it did not authorize the execution of the said mortgage. Finally, it passes the
blame on to iBank for failing to exercise the requisite due diligence in
properly evaluating Hammer's creditworthiness before it was extended an
omnibus line.

The Court disagrees with Goldkey.

To the Court's mind, Goldkey's argument, that iBank is barred from

pursuing Goldkey for the satisfaction of the unpaid obligation of Hammer
because it had already limited its liability to the real estate mortgage, is
completely absurd. Goldkey needs to be reminded that it is being sued not
as a consequence of the real estate mortgage, but rather, because it acted
as an alter ego of Hammer. Accordingly, they must be treated as one and
the same entity, making Goldkey accountable for the debts of Hammer.

Similarly, Goldkey is undoubtedly mistaken in claiming that iBank is

seeking to enforce an obligation of Chua. The records clearly show that it
was Hammer, of which Chua was the president and a stockholder, which
contracted a loan from iBank. What iBank sought was redress from

Goldkey by demanding that the veil of corporate fiction be lifted so that it

could not raise the defense of having a separate juridical personality to
evade liability for the obligations of Hammer.
DOCTRINE: A CORPORATION IS A JURIDICAL ENTITY WHICH IS
VESTED WITH A LEGAL PERSONALITY SEPARATE AND DISTINCT
FROM THOSE ACTING FOR AND IN IT’S BEHALF AND IN GENERAL
FROM THE PEOPLE COMPRIISING IT.

TITLE: HEIRS OF FE TAN UY VS. INTERNATIONAL EXCHANGE BANK

G.R. NO. 166282 FEBRUARY 13, 2013 (MENDOZA, J:)

FACTS:
From June 23, 1997 to September 3, 1997, respondent International
Exchange Bank, granted loans to Hammer Garments Corporation covered
by promissory notes and deeds of assignment, amounting to
P24,938,898.08.

On March 23, 1996, between bank and Hammer, represented by its

President and General Manager Manuel Chua a.k.a. Manuel Chua Uy Po
Tiong, granted Hammer a P25 million pesos Omhibus loan. The loans
were secured by a P9million pesos real estate mortgage executed on July
1, 1997 by Goldkey Development Corporation over several of its properties
and a P25 million Surety Agreement signed by Chua and his wife Fe Tan
Uy on April 15, 1996.
iBank filed a complaint for collection for sum of money against Hammer,
Chua, Uy and Goldkey before the RTC Makati, Chua and Hammer were in
the default for not filing an answer.

The RTC ruled in favor of iBank, but pronounced that the signature of Uy
was forged. However, the court also held that Hammer and Goldkey were
one and the same entity. Hence, the piercing of the veil of the corporate
fiction was granted. The CA affirmed the ruling of the RTC.

ISSUE:
WON Uy can be held liable to iBank for the loan obligation of Hammer as
an officer and stockholder of the said corporation.

RULING:

No, Uy is not personally liable to iBank as an officer and stockholder of

Hammer. The court found that her signatures on the said surety
agreements were forged. Basic is the rule in corporation law that a
corporation is a juridical entity which is vested with a legal personality
separate and distinct from those acting for and its behalf and in general
from the people comprising it. Following this principle obligations incurred
by the corporation, acting through its Directors, Officers and employees are
its sole liabilities.

Before a Director or Officer of a corporation can be held personally liable

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

Indeed, there is no showing that Uy committed gross negligence, and in the

absence of any of the aforementioned requisites for making a corporate
officer, director or stockholder personally liable for the obligations of a
corporation. Uy, as a treasurer and stockholder of Hammer, cannot be
made to answer for the unpaid debts of the corporation.
DOCTRINE: 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.

TITLE: Concept Builders Inc. vs National Labor Relations Commission

G.R. No. 108734, May 29, 1996 (HERMOSISIMA, JR. J.:)

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 niggers. On November 1981, private
respondents were served with 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. Public
respondent found it to be the fact, however, 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 the subcontractors whose workers performed the functions of private
respondents. Aggrieved, private respondents filed a complaint for illegal
dismissal, unfair labor practices and non-payment of their holiday pay,
overtime pay, and 13th month pay against petitioners. The labor arbiter
rendered decision in favor of the private respondents. When the same
became final and executory, a writ of execution was issued, however, the
same was refused by the security guard on duty on the ground that the
petitioners no longer occupied the premises. A break-open order was then
recommended.

ISSUE:
Whether or not the alias writ of execution can be issued against the sister
company of the petitioners, HPPI.

RULING:
Yes. 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 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 in circumstances 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:

Stock ownership by one or common ownership of both corporations.

Identity of directors and officers.
The names of keeping corporate books and records
Methods of conducting the business.
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 instances, 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.

The test in determining the applicability of the doctrine of piercing the veil of
corporate fiction as follows:

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 on exercise of its own;
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.
The aforesaid control and breach of duty must proximately cause the injury
or unjust loss complained of.
The absence of any of these elements prevents “piercing the corporate
veil” of the corporation. 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.

DOCTRINE: As a general rule the stock ownership alone by one

corporation of the stock of another does not thereby render the dominant
corporation liable for the torts of the subsidiary unless the separate
corporation existence of the subsidiary is a mere sham, or unless the
control of the subsidiary is such that it is but an instrumentality or adjunct of
the dominant corporation.

TITLE: PNB VS. RITRATO GROUP, INC., G.R. NO. 142616, JULY 31,
2001 (KAPUNAN, J.:)

FACTS:
On May 29, 1996, PNB International Finance LTD, a subsidiary company of
PNB, organized and doing business in Hongkong, 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. This credit facility was later increased successively to
US$1,140,000.00 in September 1996, to US$1,290,000.00 in November
1996, to US$ 1,425,000.00 in February 1997, and decreased to
US$1,421,316.18 in April 1998. Respondents made repayments of the
loan incurred by remitting those amounts to their loan account with PNB-
IFL in Hongkong.

On May 25, 1999, respondents filed a complaint for injunction with prayer
for the issuance of a writ of preliminary injunction and/or temporary
restraining order before the RTC of Makati. The executive Judge of the
RTC of Makati issued a 72-hour temporary restraining order.

PNB-IFL is a wholly owned subsidiary of defendant PNB, the suit against

the defendant PNB is a suit against PNB-IFL.

ISSUE:
WON respondents justified the acts of the court a quo in applying the
doctrine of Piercing the Veil of Corporate Identity “by stating that petitioner
is merely an alter ego or a business conduit of PNB-IFL”?

RULING:
No, herein petitioner is an agent with limited authority and specific duties
under a special power of attorney incorporated in the real estate mortgage.
It is not privy to the loan contracts entered into by the respondents and
PNB-IFL.

The mere fact that a corporation owns all of the stocks of another
corporation, taken alone is not sufficient to justify their being treated as one
entity. 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.

As a general rule, the stock ownership alone by one corporation of the

stock of another does not thereby render the dominant corporation liable for
the torts of the subsidiary, unless the separate corporate existence of the
subsidiary is a mere sham, or unless the control of the subsidiary is such
that it is but an instrumentality or adjunct of the dominant corporation.

DOCTRINE: The doctrine of piercing of the corporate veil applies only in

three (3) basic instances: a) when the separate and distinct corporate
personality defeats public convenience; b) in fraud cases; c) if used in alter
ego cases.

TITLE: WPM INTERNATIONAL TRADING, INC. AND WARLITO P.

MANLAPAZ VS. FE LABAYEN, G..R.NO. 182770 SEPTEMBER 17, 2014
(BRION, J.:)

FACTS:
WPM is a domestic corporation engaged in the restaurant business, while
Manlapaz is its President, WPM entered a management agreement with
Labayen (respondent was authorized to operate, manage and rehabilitate
Quickbite).
As part of her tasks, Labayen engaged the services of CLN Engineering
Services (CLN) to renovate one branch. When renovation was finally
completed, only P320K was paid leaving a balance of P112K. CLN filed a
complaint for sum of money and damages before the RTC. RTC found
Labayen liable to pay CLN actual damages.

RTC held that the respondent is entitled to indemnity from Manlapaz. The
CA affirmed the decision.

ISSUE:
Whether WPM is a mere instrumentality, alter ego, and business conduit of
Manlapaz ergo he is jointly and severally liable with WPM to the
respondent.

RULING:
No, petition is modified, Manlapaz is absolved. The rule is settled that a
corporation has a personality separate and distinct from the persons acting
for and in its behalf and, in general, from the people comprising it.

The doctrine of piercing the corporate veil applies only in three (3) basic
instances: a) when the separate and distinct corporate personality defeats
public convenience as when the corporate fiction is used as a vehicle for
the evasion of an existing obligation; b) in fraud cases, or when the
corporate entity is used to justify a wrong, protect a fraud, or defend a
crime; c) is used in alter ego cases.

Piercing the corporate veil based on the alter ego theory requires the
concurrence of three elements: 1) Control, not mere majority or complete
stock control, but complete domination, not only of finances but of policy
and business practices 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
defendants to commit fraud or wrong; to perpetuate the violation of a
statutory or other positive legal duty, and 3) The aforesaid control or breach
of duty must have proximately caused the injury or unjust lose complaint of,
the absence of any of these elements prevents piercing of the corporate
veil.
DOCTRINE: The piercing of the corporate veil is premised on the fact that
the corporation concerned must have been properly served with summons
or properly subjected to the jurisdiction of the court a quo.

TITLE: INTERNATIONAL ACADEMY OF MANAGEMENT AND

ECONOMICS VS LITTON ANDCOMPANY, INC.G.R. No. 191525,
December 13, 2017 (SERENO, CJ.:)

FACTS:
Atty. Emmanuel Santos owed Litton rental arrears and share in tax
payments. Litton filed a complaint for unlawful detainers against him which
was ruled in Litton’s favor. When the judgment against Santos was not
executed, Litton subsequently filed an action for revival of judgment. The
real property registered under I/AME was levied. Its Deed of Sale dated
1979 indicated Santos being the President representing I/AME, a juridical
entity organized in 1985.

I/AME filed a Motion to Lift Annotations Inscribed claiming it has a separate

and distinct personality from Santos. Upon motion for reconsideration, the
MeTC reversed the ruling. Litton, then, elevated the case to the RTC, which
in turn reversed the order granting the motion for reconsideration. I/AME
filed a petition with the CA and was eventually denied. CA held that no
grave abuse of discretion was committed when the trial court pierced the
corporate veil of I/AME. It concluded that Santos utilized I/AME to protect
his property from the writ of execution,therefore piercing the veil of
corporate fiction is proper.

ISSUE:
Whether or not there is denial of due process when the court pierced the
corporate veil ofI/AME

RULING:
No. As the Court has already ruled, a party whose corporation is vulnerable
to piercing of its corporate veil cannot argue violation of due process. The
piercing of the corporate veil is premised on the fact that the corporation
concerned must have been properly served with summons or properly
subjected to the jurisdiction of the court a quo. Corollary thereto, it cannot
be subjected to a writ of execution meant for another in violation of its right
to due process.
However, there is an exception to this rule: if it is shown "by clear and
convincing proof that the separate and distinct personality of the
corporation was purposefully employed to evade a legitimate and binding
commitment and perpetuate a fraud or like wrongdoings.”In this case, the
Court confirms the lower courts' findings that Santos had an existing
obligation based on a court judgment that he owed monthly rentals and
unpaid realty taxes under a lease contract he entered into as lessee with
the Litton. He was not able to comply with his obligation, and in fact,
refused to comply therewith. This Court agrees with the CA that Santos
used I/AME as a means to defeat judicial processes and to evade his
obligation to Litton.