MONFORT HERMANOS AGRICULTURAL DEVELOPMENT CORPORATION v. ANTONIO B.

MONFORT III,
GR No. 152542 & 155472, 2004-07-08

Facts:

Monfort Hermanos Agricultural Development Corporation, a domestic private corporation, is the

registered owner of a farm, fishpond and sugar cane plantation known as Haciendas San Antonio II,
Marapara, Pinanoag and Tinampa-an, all situated in Cadiz City.

It also owns one unit of motor vehicle and two units of tractors.[4] The same allowed Ramon H.
Monfort, its Executive Vice President, to breed and maintain fighting cocks in his personal capacity at
Hacienda San Antonio.

the group of Antonio Monfort III, through force and intimidation, allegedly took possession of the 4
Haciendas, the produce thereon and the motor vehicle and tractors, as well as the fighting cocks of
Ramon H. Monfort.

he Corporation, represented by its President, Ma. Antonia M. Salvatierra, and Ramon H. Monfort, in
his personal capacity, filed against the group of Antonio Monfort III, a complaint[6] for delivery of
motor vehicle, tractors and 378... fighting cocks, with prayer for injunction and damages

The group of Antonio Monfort III filed a motion to dismiss contending, inter alia, that Ma. Antonia M.
Salvatierra has no capacity to sue on behalf of the Corporation because the March 31, 1997 Board
Resolution[7] authorizing Ma. Antonia M.

Salvatierra and/or Ramon H. Monfort to represent the Corporation is void as the purported Members
of the Board who passed the same were not validly elected officers of the Corporation.

the trial court denied the motion to dismiss.[8] The group of Antonio Monfort III filed a petition for
certiorari with the Court of Appeals but the same was dismissed on June 7, 2002.

The motion for reconsideration filed by the group of Antonio Monfort III was denied.

On April 21, 1997, Ma. Antonia M. Salvatierra filed on behalf of the Corporation a complaint for
forcible entry, preliminary mandatory injunction with temporary restraining order and damages
against the group of Antonio Monfort III, before the Municipal Trial Court (MTC) of

Cadiz City.[11] It contended that the latter through force and intimidation, unlawfully took possession
of the 4 Haciendas and deprived the Corporation of the produce thereon.

the group of Antonio Monfort III alleged that they are possessing and controlling the Haciendas and
harvesting the produce therein on behalf of the corporation and not for themselves. They likewise
raised the affirmative defense... of lack of legal capacity of Ma. Antonia M. Salvatierra to sue on
behalf of the Corporation.

MTC of Cadiz City rendered a decision dismissing the complaint.

the Regional Trial Court of Negros Occidental, Branch 60, reversed the Decision of the MTCC

Aggrieved, the group of Antonio Monfort III filed a petition for review with the Court of Appeals.

Special Tenth Division set aside the judgment of the RTC and dismissed the complaint for forcible
entry for lack of capacity of Ma. Antonia M.

Salvatierra to represent the Corporation.

Unfazed, the Corporation filed a petition for review with this Court
The group of Antonio Monfort III claims that the March 31, 1997 Board Resolution authorizing Ma.
Antonia M. Salvatierra and/or Ramon H. Monfort to represent the Corporation is void because the
purported Members of the Board who passed the same were not validly elected officers... of the
Corporation.

Issues:

The focal issue in these consolidated petitions is whether or not Ma. Antonia M. Salvatierra has the
legal capacity to sue on behalf of the Corporation.

Ruling:

A corporation has no power except those expressly conferred on it by the Corporation Code and those
that are implied or incidental to its existence. In turn, a corporation exercises said powers through its
board of directors and/or its duly authorized officers and... agents. Thus, it has been observed that
the power of a corporation to sue and be sued in any court is lodged with the board of directors that
exercises its corporate powers. In turn, physical acts of the corporation, like the signing of
documents, can be performed... only by natural persons duly authorized for the purpose by corporate
by-laws or by a specific act of the board of directors.

There is thus a doubt as to whether Paul M. Monfort, Yvete M. Benedicto, Jaqueline M. Yusay and
Ester S. Monfort, were indeed duly elected Members of the Board legally constituted to bring suit in
behalf of the Corporation.

we find that Ma. Antonia M. Salvatierra failed to prove that four of those who authorized her to
represent the Corporation were the lawfully elected Members of the Board of the Corporation. As
such, they cannot confer valid authority for her to... sue on behalf of the corporation.

The General Information Sheet shall state, among others, the names of the elected directors and
officers, together with their corresponding position title… (Emphasis supplied)

In the instant case, the six signatories to the March 31, 1997 Board Resolution authorizing Ma.
Antonia M. Salvatierra and/or Ramon H. Monfort to represent the Corporation, were: Ma. Antonia M.
Salvatierra, President; Ramon H. Monfort, Executive Vice President; Directors Paul M. Monfort, Yvete
M. Benedicto and Jaqueline M. Yusay; and Ester S. Monfort, Secretary.19 However, the names of the
last four (4) signatories to the said Board Resolution do not appear in the 1996 General Information
Sheet submitted by the Corporation with the SEC. Under said General Information Sheet the
composition of the Board is as follows:

1. Ma. Antonia M. Salvatierra (Chairman);

2. Ramon H. Monfort (Member);

3. Antonio H. Monfort, Jr., (Member);

4. Joaquin H. Monfort (Member);

5. Francisco H. Monfort (Member) and

6. Jesus Antonio H. Monfort (Member).20

There is thus a doubt as to whether Paul M. Monfort, Yvete M. Benedicto, Jaqueline M. Yusay and
Ester S. Monfort, were indeed duly elected Members of the Board legally constituted to bring suit in
behalf of the Corporation.21
In Premium Marble Resources, Inc. v. Court of Appeals,22 the Court was confronted with the similar
issue of capacity to sue of the officers of the corporation who filed a complaint for damages. In the
said case, we sustained the dismissal of the complaint because it was not established that the
Members of the Board who authorized the filing of the complaint were the lawfully elected officers of
the corporation

eliciano vs. COA (G.R. No. 147402, January 14, 2004

Facts: COA assessed Leyte Metropolitan Water District (LMWD) auditing fees. Petitioner Feliciano, as
General Manager of LMWD, contended that the water district could not pay the said fees on the basis
of Sections 6 and 20 of P.D. No. 198 as well as Section 18 of R.A. No. 6758. He primarily claimed that
LMWD is a private corporation not covered by COA's jurisdiction. Petitioner also asked for refund of
all auditing fees LMWD previously paid to COA. COA Chairman denied petitioner’s requests. Petitioner
filed a motion for reconsideration which COA denied. Hence, this petition.

Issue: Whether a Local Water District (“LWD”) created under PD 198, as amended, is a government-
owned or controlled corporation subject to the audit jurisdiction of COA or a private corporation
which is outside of COA’s audit jurisdiction.

Held: Petition lacks merit. The Constitution under Sec. 2(1), Article IX-D and existing laws mandate
COA to audit all government agencies, including government-owned and controlled corporations with
original charters. An LWD is a GOCC with an original charter.

The Constitution recognizes two classes of corporations. The first refers to private corporations
created under a general law. The second refers to government-owned or controlled corporations
created by special charters. Under existing laws, that general law is the Corporation Code.

Obviously, LWD’s are not private corporations because they are not created under the Corporation
Code. LWD’s are not registered with the Securities and Exchange Commission. Section 14 of the
Corporation Code states that “all corporations organized under this code shall file with the SEC
articles of incorporation x x x.” LWDs have no articles of incorporation, no incorporators and no
stockholders or members. There are no stockholders or members to elect the board directors of
LWDs as in the case of all corporations registered with the SEC. The local mayor or the provincial
governor appoints the directors of LWDs for a fixed term of office. The board directors of LWDs are
not co-owners of the LWDs. The board directors and other personnel of LWDs are government
employees subject to civil service laws and anti-graft laws. Clearly, an LWD is a public and not a
private entity, hence, subject to COA’s audit jurisdiction.

San Juan Structural and Steel Fabricators, Inc. vs Court of Appeals

296 SCRA 631 [GR No. 129459 September 29, 1998]

Facts: Plaintiff-appellant San Juan structural and steel fabricators Inc.’s amended complaint alleged
that on February 14, 1989, plaintiff-appellant entered into an agreement with defendant-appellee
Motorich Sales Corporation for the transfer to it of a parcel of land that as stipulated in the
agreement of February 14, 1i989, plaintiff-appellant paid the down payment in the sum of P100,000,
the balance to be paid on or before March 2, 19889; that on March 1, 1989,Mr. Andres T. Co,
president of Plaintiff-appellant corporation, wrote a letter to defendant-appellee Motorich Sales
Corporation requesting a computation for the balance to be paid; that said letter was coursed through
the defendant-appellee’s broker.
 Linda Aduca who wrote the computation of the balance; that on March 2, 1989, plaintiff-appellant
was ready with the amount corresponding to the balance, covered by Metrobank cashier’s check no.
004223 payable to defendant-appellee Motorich Sales Corporation; that plaintiff-appellant and
defendant-appellee were supposed to meet in the plaintiff-appellant’s office but defendant-
appellee’s treasurer, Nenita Lee Gruenbeg did not appear; that defendant-appelle despite repeated
demands and in utter disregard of its commitments had refused to execute the transfer of
rights/deed of assignment which is necessary to transfer the certificate of title; that defendant ACL
development corporation is impleaded as a necessary party since TCT no. 362909 is still in the name
of said defendant; while defendant VNM Realty and Development Corporation is likewise impleaded
as a necessary party in view of the fact that it is the transferor of the right in favor of defendant-
appellee Motorich Sales Corporation; that on April 6, 1989 defendant ACL Development Corporation
and Motorich Sales Corporation entered into a deed of absolute sale whereby the former transferred
to the latter the subject property; that by reason of said transfer; the registry of deeds of Quezon City
issued a new title in the name of Motorich Sales Corporation, represented by defendant-appellee
Nenita Lee Gruenbeg and Reynaldo L. Gruenbeg, under TCT no. 3751; that as a result of defendants-
appellees Nenita and Motorich’s bad faith in refusing to execute a formal transfer of rights/deed of
assignment, plaintiff-appellant suffered moral and nominal damages which may be assessed against
defendant-appellees in the sum of P500,000; that as a result of an unjustified and unwarranted failure
to execute the required transfer or formal deed of sale in favor of plaintiff-appellant, defendant-
appellees should be assessed exemplary damages in the sum of P100,000; that by reason of the said
bad faith in refusing to execute a transfer in favor of plaintiff-appellant the latter lost opportunity to
construct a residential building in the sum of P100,000 and that as a consequence of such bad faith, it
has been constrained to obtain the services of counsel at an agreed fee of P100,000 plus appearance
fee of for every appearance in court hearings.

Issues: Whether or not the corporation’s treasurer act can bind the corporation.

Whether or not the doctrine of piercing the veil of corporate entity is applicable.

Held: No. Such contract cannot bind Motorich, because it never authorized or ratified such sale.

A corporation is a juridical person separate and distinct from its stockholders or members.
Accordingly, the property of the corporation is not the property of the corporation is not the
property of its stockholders or members and may not be sold by the stockholders or members
without express authorization from the corporation’s board of directors.

Section 23 of BP 68 provides the Board of Directors or Trustees – Unless otherwise provided in this
code, the corporate powers of all corporations formed under this code shall be exercised, all business
conducted, and all property of such corporations controlled and held by the board of directors or
trustees to be elected from among the stockholders of stocks, or where there is no stock, from among
the members of the corporations, who shall hold office for 1 year and until their successors are
elected and qualified.

As a general rule, the acts of corporate officers within the scope of their authority are binding on the
corporation. But when these officers exceed their authority, their actions, cannot bind the
corporation, unless it has ratified such acts as is estopped from disclaiming them.

Because Motorich had never given a written authorization to respondent Gruenbeg to sell its parcel
of land, we hold that the February 14, 1989 agreement entered into by the latter with petitioner is
void under Article 1874 of the Civil Code. Being inexistent and void from the beginning, said
contract cannot be ratified.

The statutorily granted privilege of a corporate veil may be used only for legitimate purposes. On
equitable consideration,the veil can be disregarded when it is utilized as a shield to commit fraud,
illegality or inequity, defeat public convenience; confuse legitimate issues; or serve as a mere alter
ego or business conduit of a person or an instrumentality, agency or adjunct of another corporation.
We stress that the corporate fiction should be set aside when it becomes a shield against liability for
fraud, or an illegal act on inequity committed on third person. The question of piercing the veil of
corporate fiction is essentially, then a matter of proof. In the present case, however, the court finds
no reason to pierce the corporate veil of respondent Motorich. Petitioner utterly failed to establish
the said corporation was formed, or that it is operated for the purpose of shielding any alleged
fraudulent or illegal activities of its officers or stockholders; or that the said veil was used to conceal
fraud, illegality or inequity at the expense of third persons like petitioner.

THE EXECUTIVE SECRETARY, THE SECRETARY OF JUSTICE, THE SECRETARY OF LABOR AND
EMPLOYMENT, AND THE SECRETARY OF FOREIGN AFFAIRS, OWWA ADMINISTRATOR, and POEA
ADMINISTRATOR, Petitioners, v. THE HON. COURT OF APPEALS and ASIAN RECRUITMENT COUNCIL
PHILIPPINE CHAPTER (ARCO-PHIL.), INC., representing its members: Worldcare Services
Internationale, Inc., Steadfast International Recruitment Corporation, Dragon International
Manpower Services Corporation, Verdant Manpower Mobilization Corporation, Brent Overseas
Personnel, Inc., ARL Manpower Services, Inc., Dahlzhen International Services, Inc., Interworld
Placement Center, Inc., Lakas Tao Contract Services, Ltd. Co., and SSC Multiservices, Respondents.
G.R. NO. 131719 | May 25, 2004 | 429 SCRA 781 | Second Division Decision | Justice Calleja, Sr.
Constitutional Law

FACTS: Republic Act 8042 (Migrant Workers and Overseas Filipino Act of 1995) took effect on 15 July
1995. Prior to its effectivity, Asian Recruitment Council Philippine Chapter Inc (ARCO-Phil) filed
petition for declaratory relief. The alleged that:

Section 6, subsections (a) to (m) is unconstitutional because licensed and authorized recruitment
agencies are placed on equal footing with illegal recruiters. It contended that while the Labor Code
distinguished between recruiters who are holders of licenses and non-holders thereof in the
imposition of penalties, Rep. Act No. 8042 does not make any distinction.

The penalties in Section 7(a) and (b) being based on an invalid classification are, therefore, repugnant
to the equal protection clause, besides being excessive; hence, such penalties are violative of Section
19(1), Article III of the Constitution.

The petitioners asserted that the respondent is not the real party-in-interest as petitioner in the trial
court. It is inconceivable how the respondent, a non-stock and non-profit corporation, could sustain
direct injury as a result of the enforcement of the law. They argued that if, at all, any damage would
result in the implementation of the law, it is the licensed and registered recruitment agencies and/or
the unskilled Filipino migrant workers discriminated against who would sustain the said injury or
damage, not the respondent.

In their answer to the petition, they contend that ARCO-Phil has no legal standing, it being a non-
stock, non-profit organization; hence, not the real party-in-interest as petitioner in the action. It is
service-oriented while the recruitment agencies it purports to represent are profit-oriented.

ISSUE:
Whether or not ARCO-Phil has legal standing to assail Republic Act 8042?

RULING:
The modern view is that an association has standing to complain of injuries to its members. This
view fuses the legal identity of an association with that of its members. An association has standing to
file suit for its workers despite its lack of direct interest if its members are affected by the action. An
organization has standing to assert the concerns of its constituents. However, the respondent has no
locus standi to file the petition for and in behalf of unskilled workers. We note that it even failed to
implead any unskilled workers in its petition.
“Locus standi” (place of standing) – the right of the party to appear and be heard before court, or the
right of a party to commence an action.a temporary restraining order enjoining the enforcement of
the writ of preliminary injunction issued by the trial court.

The Respondent Has Locus Standi

To File the Petition in the RTC in Representation of the Eleven Licensed and Registered Recruitment
Agencies Impleaded in the Amended Petition

The modern view is that an association has standing to complain of injuries to its members. This view
fuses the legal identity of an association with that of its members.16 An association has standing to
file suit for its workers despite its lack of direct interest if its members are affected by the action. An
organization has standing to assert the concerns of its constituents.17

In Telecommunications and Broadcast Attorneys of the Philippines v. Commission on Elections,18 we

held that standing jus tertii would be recognized only if it can be shown that the party suing has
some substantial relation to the third party, or that the right of the third party would be diluted
unless the party in court is allowed to espouse the third party’s constitutional claims.

In this case, the respondent filed the petition for declaratory relief under Rule 64 of the Rules of Court
for and in behalf of its eleven (11) licensed and registered recruitment agencies which are its
members, and which approved separate resolutions expressly authorizing the respondent to file the
said suit for and in their behalf. We note that, under its Articles of Incorporation, the respondent
was organized for the purposes inter alia of promoting and supporting the growth and
development of the manpower recruitment industry, both in the local and international levels;
providing, creating and exploring employment opportunities for the exclusive benefit of its general
membership; enhancing and promoting the general welfare and protection of Filipino workers; and,
to act as the representative of any individual, company, entity or association on matters related to
the manpower recruitment industry, and to perform other acts and activities necessary to
accomplish the purposes embodied therein. The respondent is, thus, the appropriate party to assert
the rights of its members, because it and its members are in every practical sense identical. The
respondent asserts that the assailed provisions violate the constitutional rights of its members and
the officers and employees thereof. The respondent is but the medium through which its individual
members seek to make more effective the expression of their voices and the redress of their
grievances.19

However, the respondent has no locus standi to file the petition for and in behalf of unskilled
workers. We note that it even failed to implead any unskilled workers in its petition. Furthermore, in
failing to implead, as parties-petitioners, the eleven licensed and registered recruitment agencies it
claimed to represent, the respondent failed to comply with Section 2 of Rule 6320 of the Rules of
Court. Nevertheless, since the eleven licensed and registered recruitment agencies for which the
respondent filed the suit are specifically named in the petition, the amended petition is deemed
amended to avoid multiplicity of suits.21

The Assailed Order and Writ of

MANUEL C. ESPIRITU v. PETRON CORPORATION, GR No. 170891, 2009-11-24

Facts:

Respondent Petron... sold and distributed LPG in cylinder tanks that carried its trademark "Gasul."

Respondent Carmen J. Doloiras owned and operated Kristina Patricia Enterprises (KPE), the
exclusive... distributor of Gasul LPGs in the whole of Sorsogon.
Jose Nelson Doloiras (Jose) served as KPE's manager.

Bicol Gas was also in the business of selling and distributing LPGs in Sorsogon but theirs carried the
trademark "Bicol Savers Gas." Petitioner Audie Llona managed Bicol Gas.

In the course of trade and competition, any given distributor of LPGs at times acquired possession of
LPG cylinder tanks belonging to other distributors operating in the same area. They called these
"captured cylinders."

According to KPE's manager,... in April 2001 Bicol Gas... agreed with KPE for the swapping of
"captured cylinders" since one distributor could not refill captured cylinders with its own brand of
LPG.

At one time, in the course of implementing this arrangement, KPE's Jose visited the Bicol Gas refilling
plant. While there, he noticed... several Gasul tanks in Bicol Gas' possession. He requested a swap but
Audie Llona of Bicol Gas replied that he first needed to ask the permission of the Bicol Gas owners.
That permission was given and they had a swap involving around 30 Gasul tanks held by Bicol Gas in
exchange... for assorted tanks held by KPE.

KPE's Jose noticed, however, that Bicol Gas still had a number of Gasul tanks in its yard.

He offered to make a swap for these but Llona declined, saying the Bicol Gas owners wanted to send
those tanks to Batangas.

Later Bicol Gas told Jose that it had no more Gasul tanks left... in its possession. Jose observed on
almost a daily basis, however, that Bicol Gas' trucks which plied the streets of the province carried a
load of Gasul tanks. He noted that KPE's volume of sales dropped significantly from June to July 2001.

On August 4, 2001 KPE's Jose saw a particular Bicol Gas truck on the Maharlika Highway.

While the truck carried mostly Bicol Savers LPG tanks,... it had on it one unsealed 50-kg Gasul tank
and one 50-kg Shellane tank.

Jose followed the truck and when it stopped at a store, he asked... the driver, Jun Leorena, and the
Bicol Gas sales representative, Jerome Misal, about the Gasul tank in their truck. They said it was
empty but, when Jose turned open its valve, he noted that it was not. Misal and Leorena then
admitted that the Gasul and Shellane tanks on their... truck belonged to a customer who had them
filled up by Bicol Gas. Misal then mentioned that his manager was a certain Rolly Mirabena.

Because of the above incident, KPE filed a complaint... for violations of

R.A.

623 (illegally filling up registered cylinder tanks), as amended, and Sections 155 (infringement of trade
marks) and 169.1 (unfair competition) of the Intellectual Property Code (R.A. 8293)

The complaint charged the following: Jerome Misal, Jun Leorena, Rolly Mirabena, Audie Llona, and
several John and Jane Does, described as the directors, officers, and stockholders of Bicol Gas.

the provincial prosecutor ruled that there was probable cause only for violation of R.A. 623... and that
only the four Bicol Gas employees, Mirabena, Misal, Leorena, and petitioner Llona, could be charged.
The charge against... the other petitioners who were the stockholders and directors of the company
was dismissed.

Petron and KPE filed a petition for review with the Office of the Regional State Prosecutor, Region V,
which initially denied the petition but partially granted it on motion for reconsideration.
The Office of the Regional State Prosecutor ordered the filing of... additional informations against the
four employees of Bicol Gas for unfair competition.

It ruled, however, that no case for trademark infringement was present. The Secretary of Justice
denied the appeal of Petron and KPE and their motion for reconsideration.

Petron and KPE filed a special civil action for certiorari with the Court of Appeals... the Court... of
Appeals reversed the Secretary of Justice's ruling. It held that unfair competition does not necessarily
absorb trademark infringement.

Consequently, the court ordered the filing of additional charges of trademark infringement against
the concerned Bicol Gas employees as... well.

Since the Bicol Gas employees presumably acted under the direct order and control of its owners,
the Court of Appeals also ordered the inclusion of the stockholders of Bicol Gas in the various
charges, bringing to 16 the number of persons to be charged, now including petitioners

Manuel C. Espiritu, Jr., Freida F. Espiritu, Carlo F. Espiritu, Rafael F. Espiritu, Rolando M. Mirabuna,
Hermilyn A. Mirabuna, Kim Roland A. Mirabuna, Kaye Ann A. Mirabuna, Ken Ryan A. Mirabuna,
Juanito P. de Castro, Geronima A. Almonite, and Manuel C. Dee (together with Audie

Llona), collectively, petitioners Espiritu, et al. The court denied the motion for reconsideration of
these employees and stockholders in its Resolution dated January 6, 2006, hence, the present petition
for review[6] before this Court.

Issues:

Whether or not the facts of the case warranted the filing of charges against the Bicol Gas people for
Filling up the LPG tanks registered to another manufacturer without the latter's consent in violation of
R.A. 623, as amended

Ruling:

R.A. 623, as amended,... punishes any person who, without the written consent of the manufacturer
or seller of gases contained in duly registered steel cylinders or tanks, fills the steel cylinder or tank,
for the purpose of sale, disposal or trafficking,... other than the purpose for which the manufacturer
or seller registered the same. This was what happened in this case, assuming the allegations of KPE's
manager to be true. Bicol Gas employees filled up with their firm's gas the tank registered to Petron
and bearing its mark... without the latter's written authority. Consequently, they may be prosecuted
for that offense.

Bicol Gas is a corporation. As such, it is an entity separate and distinct from the persons of its officers,
directors, and stockholders. It has been held, however, that corporate officers or employees,
through whose act, default or omission the corporation commits a crime, may... themselves be
individually held answerable for the crime.

Jose claimed in his affidavit that, when he negotiated the swapping of captured cylinders with Bicol
Gas, its manager, petitioner Audie Llona, claimed that he would be consulting with the owners of
Bicol Gas about it. Subsequently, Bicol Gas declined the offer to swap cylinders... for the reason that
the owners wanted to send their captured cylinders to Batangas. The Court of Appeals seized on this
as evidence that the employees of Bicol Gas acted under the direct orders of its owners and that "the
owners of Bicol Gas have full control of the operations... of the business."

The "owners" of a corporate organization are its stockholders and they are to be distinguished from
its directors and officers. The petitioners here, with the exception of Audie Llona, are being charged in
their capacities as stockholders of Bicol Gas. But the Court of Appeals... forgets that in a corporation,
the management of its business is generally vested in its board of directors, not its stockholders.
Stockholders are basically investors in a corporation. They do not have a hand in running the day-
to-day business... operations of the corporation unless they are at the same time directors or
officers of the corporation. Before a stockholder may be held criminally liable for acts committed by
the corporation, therefore, it must be shown that he had knowledge of the criminal act committed
in... the name of the corporation and that he took part in the same or gave his consent to its
commission, whether by action or inaction.

Although the KPE manager heard petitioner Llona say that he was going to consult the owners of Bicol
Gas regarding the offer to swap additional captured cylinders, no indication was given... as to which
Bicol Gas stockholders Llona consulted.

It would be unfair to charge all the stockholders involved, some of whom were proved to be
minors.

No evidence was presented establishing the names of the stockholders who were charged with
running the... operations of Bicol Gas. The complaint even failed to allege who among the
stockholders sat in the board of directors of the company or served as its officers.

The Court of Appeals of course specifically mentioned petitioner stockholder Manuel C. Espiritu, Jr. as
the registered owner of the truck that the KPE manager brought to the police for investigation
because that truck carried a tank of Petron Gasul. But the act that R.A. 623... punishes is the unlawful
filling up of registered tanks of another. It does not punish the act of transporting such tanks. And the
complaint did not allege that the truck owner connived with those responsible for filling up that Gasul
tank with Bicol Gas LPG.

MANILA ELECTRIC COMPANY v. T.E.A.M. ELECTRONICS CORPORATION, GR NO. 131723, 2007-12-13

Facts:

T.E.A.M. Electronics Corporation (TEC) was formerly known as NS Electronics (Philippines), Inc.

Petitioner and NS Electronics (Philippines), Inc., the predecessor-in-interest of respondent TEC, were
parties to two separate contracts... petitioner undertook to supply TEC's building known as Dyna Craft
International Manila (DCIM)

Another contract... was entered into for the supply of electric power to TEC's NS Building

TEC, under its former name National Semi-Conductors (Phils.) entered into a Contract of Lease[5] with
respondent Ultra Electronics Industries, Inc. (Ultra) for the use of the former's DCIM building

Ultra was, however, ejected from the premises on February 12, 1988 by virtue of a court order, for
repeated violation of the terms and conditions of the lease contract.

a team of petitioner's inspectors conducted a surprise inspection of the electric meters installed at
the DCIM building, witnessed by Ultra's[6] representative,... The two meters... were found to be
allegedly tampered with and did not register the actual power consumption in the building.

petitioner informed TEC of the results of the inspection and demanded from the latter the payment of
P7,040,401.01 representing its unregistered consumption from February 10, 1986 until September 28,
1987, as a result of the alleged tampering... of the meters.

Since Ultra was in possession of the subject building during the covered period, TEC's Managing
Director, Mr. Bobby Tan, referred the demand letter to Ultra[9] which, in... turn, informed TEC that its
Executive Vice-President had met with petitioner's representative. Ultra further intimated that
assuming that there was tampering of the meters, petitioner's assessment was excessive.[10] For
failure of TEC to pay the... differential billing, petitioner disconnected the electricity supply to the
DCIM building on April 29, 1988.

TEC filed a complaint on May 27, 1988 before the Energy Regulatory Board (ERB) praying that...
electric power be restored to the DCIM building.[11] The ERB immediately ordered the reconnection
of the service but petitioner complied with it only on October 12, 1988 after TEC paid P1,000,000.00,
under protest. The complaint before the ERB was later... withdrawn as the parties deemed it best to
have the issues threshed out in the regular courts. Prior to the reconnection, or on June 7, 1988,
petitioner conducted a scheduled inspection of the questioned meters and found them to have been
tampered anew.

petitioner conducted another inspection, this time, in TEC's NS Building. The inspection allegedly
revealed that the electric meters were not registering the correct power consumption.

Petitioner, thus, sent TEC another letter demanding payment of the aforesaid amount,... with a
warning that the electric service would be disconnected in case of continued refusal to pay the
differential billing.[15] To avert the impending disconnection of electrical service, TEC paid the above
amount, under protest.

TEC and TPC filed a complaint for damages against petitioner and Ultra[17] before the Regional Trial
Court (RTC) of Pasig.

The trial court found the evidence of petitioner insufficient to prove that TEC was guilty of tampering
the meter installations.

the CA which affirmed the RTC decision, with a modification of the amount of actual damages and
interest thereon.

Meralco shall pay plaintiff T.E.A.M.

Electronics Corporation and Technology Electronics Assembly and Management Pacific Corporation
the sum of P150,000.00 per month for five (5) months for actual damages incurred when it was
compelled to lease a generator set with interest at the legal rate from the above-stated... date.

Issues:

whether or not TEC tampered with the electric meters installed at its DCIM and NS buildings

If so, whether or not it is liable for the differential billing as computed by petitioner

whether or not petitioner... was justified in disconnecting the electric power supply in TEC's DCIM
building.

Ruling:

damages

Actual damages are compensation for an injury that will put the injured party in the position where it
was before the injury. They pertain to such injuries or losses that are actually sustained and...
susceptible of measurement. Except as provided by law or by stipulation, a party is entitled to
adequate compensation only for such pecuniary loss as is duly proven. Basic is the rule that to recover
actual damages, not only must the amount of loss be capable of proof; it must... also be actually
proven with a reasonable degree of certainty, premised upon competent proof or the best evidence
obtainable.[

Respondent TEC sufficiently established, and petitioner in fact admitted, that the former paid
P1,000,000.00 and P280,813.72 under protest, the amounts representing a portion of the latter's
claim of differential billing. With the finding that no tampering was committed and,... thus, no
differential billing due, the aforesaid amounts should be returned by petitioner, with interest, as
ordered by the Court of Appeals and pursuant to the guidelines set forth by the Court.

despite the appellate court's conclusion that no tampering was committed, it held Ultra solidarily
liable with petitioner for P1,000,000.00, only because the former, as occupant of the building,
promised to settle the claims of the latter. This ruling is erroneous.

Ultra's promise was conditioned upon the finding of defect or tampering of the meters. It did not
acknowledge any culpability and liability, and absent any tampered meter, it is absurd to make the
lawful occupant liable. It was petitioner who received the P1 million; thus, it... alone should be held
liable for the return of the amount.

TEC also sufficiently established its claim for the reimbursement of the amount paid as rentals for the
generator set it was constrained to rent by reason of the illegal disconnection of electrical service. The
official receipts and purchase orders submitted by TEC as evidence... sufficiently show that such
rentals were indeed made. However, the amount of P150,000.00 per month for five months, awarded
by the CA, is excessive. Instead, a total sum of P150,000.00, as found by the RTC, is proper.

As to the payment of exemplary damages and attorney's fees, we find no cogent reason to disturb the
same. Exemplary damages are imposed by way of example or correction for the public good in
addition to moral, temperate, liquidated, or compensatory damages.[47] In this case, to serve as an
example that before a disconnection of electrical supply can be effected by a public utility, the
requisites of law must be complied with we affirm the award of P200,000.00 as exemplary
damages. With the award of exemplary damages,... the award of attorney's fees is likewise proper,
pursuant to Article 2208[48] of the Civil Code. It is obvious that TEC needed the services of a lawyer
to argue its cause through three levels of the judicial hierarchy. Thus, the award of P200,000.00 is
in... order.

We, however, deem it proper to delete the award of moral damages. TEC's claim was premised
allegedly on the damage to its goodwill and reputation.[50] As a rule, a corporation is not entitled
to moral damages because, not being a natural person, it cannot... experience physical suffering or
sentiments like wounded feelings, serious anxiety, mental anguish and moral shock. The only
exception to this rule is when the corporation has a reputation that is debased, resulting in its
humiliation in the business realm.[51] But in such a case, it is imperative for the claimant to present
proof to justify the award. It is essential to prove the existence of the factual basis of the damage and
its causal relation to petitioner's acts.[52] In the present case, the... records are bereft of any evidence
that the name or reputation of TEC/TPC has been debased as a result of petitioner's acts. Besides, the
trial court simply awarded moral damages in the dispositive portion of its decision without stating the
basis thereof.

ACEBEDO OPTICAL COMPANY v. CA, GR No. 100152, 2000-03-31

Facts:

At bar is a petition for review under Rule 45 of the Rules of Court seeking to nullify the dismissal by
the Court of Appeals of the original petition for certiorari, prohibition and mandamus filed by the
herein petitioner against the City Mayor and

City Legal Officer of Iligan and the Samahang Optometrist sa Pilipinas - Iligan Chapter (SOPI, for
brevity).

Petitioner applied with the Office of the City Mayor of Iligan for a business permit. After consideration
of petitioner's application and the opposition interposed thereto by local optometrists, respondent
City Mayor issued Business Permit No. 5342 subject to the following... conditions:
Since it is a corporation, Acebedo cannot put up an optical clinic but only a commercial store;

Acebedo cannot examine and/or prescribe reading and similar optical glasses for patients, because
these are functions of optical clinics;

Acebedo cannot sell reading and similar eyeglasses without a prescription having first been made by
an independent optometrist (not its employee) or independent optical clinic. Acebedo can only sell
directly to the public, without need of a prescription, Ray-Ban and... similar eyeglasses;

Acebedo cannot advertise optical lenses and eyeglasses, but can advertise Ray-Ban and similar glasses
and frames;

Acebedo is allowed to grind lenses but only upon the prescription of an independent optometrist

On December 5, 1988, private respondent Samahan ng Optometrist Sa Pilipinas (SOPI), Iligan Chapter,
through its Acting President, Dr. Frances B. Apostol, lodged a complaint against the petitioner before
the Office of the City Mayor, alleging that Acebedo had violated the... conditions set forth in its
business permit and requesting the cancellation and/or revocation of such permit.

Issues:

Whether or not

THE RESPONDENT CITY MAYOR ACTED BEYOND HIS AUTHORITY IN IMPOSING THE SPECIAL
CONDITIONS IN THE PERMIT

Ruling:

In the present case, the objective of the imposition of subject conditions on petitioner's business
permit could be attained by requiring the optometrists in petitioner's employ to produce a valid
certificate of registration as optometrist, from the Board of Examiners in

Optometry. A business permit is issued primarily to regulate the conduct of business and the City
Mayor cannot, through the issuance of such permit, regulate the practice of a profession, like that
of optometry. Such a function is within the exclusive domain of the... administrative agency
specifically empowered by law to supervise the profession, in this case the Professional Regulations
Commission and the Board of Examiners in Optometry.

WHEREFORE, the petition is GRANTED; the Decision of the Court of Appeals in CA-GR SP No. 22995
REVERSED; and the respondent City Mayor is hereby ordered to reissue petitioner's business permit in
accordance with law and with this disposition. No pronouncement as to... costs.

Principles:

SECTION 171, paragraph 2 (n) of Batas Pambansa Bilang 337 otherwise known as the Local
Government Code of 1983, reads:

SEC. 171. The City Mayor shall:... x x x... n) Grant or refuse to grant, pursuant to law, city licenses or
permits, and revoke the same for violation of law or ordinance or the conditions upon which they are
granted.

However, the power to grant or issue licenses or business permits must always be exercised in
accordance with law, with utmost observance of the rights of all concerned to due process and equal
protection of the law.
As aptly discussed by the Solicitor General in his Comment, the power to issue licenses and permits
necessarily includes the corollary power to revoke, withdraw or cancel the same. And the power to
revoke or cancel, likewise includes the power to restrict through the imposition... of certain
conditions. In the case of Austin-Hardware, Inc. vs. Court of Appeals,[7] it was held that the power to
license carries with it the authority to provide reasonable terms and conditions under which the
licensed business shall be conducted. As the

Solicitor General puts it:

"If the City Mayor is empowered to grant or refuse to grant a license, which is a broader power, it
stands to reason that he can also exercise a lesser power that is reasonably incidental to his express
power, i. e. to restrict a license through the imposition of... certain conditions, especially so that there
is no positive prohibition to the exercise of such prerogative by the City Mayor, nor is there any
particular official or body vested with such authority"

Sta. Monica Industrial and Development Corp. v. DAR

G.R. No. 164846

Facts:
1. Asuncion Trinidad is the owner of five parcels of land with a total area of 4.69 hectares in
Calumpit, Bulacan. Private respondent Basilio De Guzman is the agricultural leasehold tenant of
Trinidad.

2. As an agricultural leasehold tenant, De Guzman was issued certificates of Land Transfer on July 22,
1981.

3. De Guzman filed a petition for the issuance of patent under his name with the Regional Office of
DAR. The DAR sent notices to Trinidad requiring her to comment. Instead of complying, Trinidad filed
a motion for bill of particulars.

4. After due proceedings, the Regional Director of DAR issued the order granting Emancipation
Patent in favor of De Guzman as qualified farmer-beneficiary of Agrarian Reform Program.

5. Trinidad filed a motion for reconsideration, but her motion was denied.

6. A year later, petitioner Sta. Monica filed a petition for certiorari and prohibition with CA assailing
the order of DAR. Sta. Monica claimed that while it is true that Trinidad was the former owner of the
disputed parcel of land, the said landholding was sold on Jan. 27, 1986 in favor of Sta. Monica.

De Guzman argued that the alleged sale of the landholding is illegal due to the lack of requisite
clearance from the DAR. The said clearance is required under P.D. No. 27,15 the Tenant Emancipation
Decree, which prohibits transfer of covered lands except to tenant-beneficiaries. According to De
Guzman, since no clearance was sought from, and granted by, the DAR, the sale in favor of petitioner
by Trinidad is inexistent and void. Hence, Trinidad remained the owner of the disputed property.

7. Sta. Monica asserted that there was a denial of due process because it was not furnished a notice
of coverage under the CARP law.

8. The CA dismissed the petition of Sta. Monica for lack of merit. The CA held that Sta. Monica is not
a real party-in-interest because it cannot be considered as an owner of the land it bought from
Trinidad.

Issue:
Whether Sta. Monica, a corporation with separate juridical personality has been denied of the
opportunity of notice and hearing when the DAR awarded land ownership to an agrarian reform
farmer-beneficiary, in the person of De Guzman.
Ruling:
No. The corporation Sta. Monica was not denied of the opportunity of notice and hearing. Trinidad is
still deemed the owner of the agricultural land sold to Sta. Monica; no need for separate notice of
coverage under CARP law.
Buyer Sta. Monica is owned and controlled by Trinidad and her family of which they own 98% of the
outstanding capital stock. As owners of 98% of outstanding capital stock, they are beneficial owners
of all the assets of the corporation including the agricultural land sold by Trinidad to Sta. Monica. At
the very last, the notice to her is already a notice to Sta. Monica because the corporation acted as a
mere conduit of Trinidad.

All these circumstances indicate that Trinidad has remained as the real owner of the agricultural land
sold to Sta. Monica. The sale to Sta. Monica is not valid because it is prohibited under P.D. No. 27.
More importantly, it must be deemed as a mere ploy to evade the applicable provisions of the
agrarian law.

But it is a fiat that the corporate vehicle cannot be used as a shield to protect fraud or justify wrong.
Thus, the veil of corporate fiction will be pierced when it is used to defeat public convenience and
subvert public policy.

Considering that Trinidad remained to be the true and legal owner of the agricultural land, there is no
need for another notice of coverage to be sent or furnished to Sta. Monica. At the very least, the
notice to her is already notice to Sta. Monica because the corporation acted as a mere conduit of
Trinidad. The CA correctly dismissed the petition of Sta. Monica to annul the orders of the Regional
Director placing the agricultural land of Trinidad under the agrarian reform law.

RUBEN MARTINEZ v. CA, GR No. 131673, 2004-09-10

Facts:

Respondent BPI International Finance[3] is a foreign corporation not doing business in the Philippines,
with office address at the Bank of America Tower, 12 Harcourt Road, Central Hongkong. It was a
deposit-taking company organized and existing under... and by virtue of the laws of Hongkong, and
was also engaged in investment banking operations therein.

Cintas Largas, Ltd. (CLL) was also a foreign corporation, established in Hongkong, with a paid-up
capital of HK$10,000. The registered shareholders of the CLL in Hongkong were the Overseas
Nominee, Ltd. and Shares Nominee, Ltd., which were mainly nominee shareholders. In

Hongkong, the nominee shareholder of CLL was Baker & McKenzie Nominees, Ltd., a leading solicitor
firm. However, beneficially, the company was equally owned by Messrs. Ramon Siy, Ricardo Lopa,
Wilfrido C. Martinez, and Miguel J. Lacson.

The bulk of the business of the CLL was the importation of molasses from the Philippines, principally
from the Mar Tierra Corporation, and the resale thereof in the international market.[5] However, Mar
Tierra Corporation also sold molasses to its... customers.[6] Wilfrido C. Martinez was the president of
Mar Tierra Corporation, while its executive vice-president was Blamar Gonzales. The business
operations of both the CLL and Mar Tierra Corporation were run by Wilfrido Martinez and Gonzales.

About 42% of the capital stock of Mar Tierra Corporation was owned by RJL Martinez Fishing
Corporation (RJL), the leading tuna fishing outfit in the Philippines. Petitioner Ruben Martinez was
the president of RJL and a member of the board of directors thereof. The... majority stockholders of
RJL were Ruben Martinez and his brothers, Jose and Luis Martinez. Sixty-eight (68) percent of the
total assets of Ruben Martinez were in the RJL.

In 1979, respondent BPI International Finance (then AIFL) granted CLL a letter of credit in the amount
of US$3,000,000. Wilfrido Martinez signed the letter agreement with the respondent for the CLL.
Cintas Largas, Ltd. will purchase molasses from the Philippines, mainly from Mar Tierra Corporation,
and then sell the molasses to foreign countries. Both the purchase of the molasses from the
Philippines and the subsequent sale thereof to foreign customers... were effected by means of Letters
of Credit.

On January 24, 1979, the CLL opened a money market placement with the respondent bearing MMP
No. 063, with an initial placement of US$390,000.[8] The CLL also opened and maintained a foreign
currency account and a deposit account with the respondent.

On March 25, 1980, the CLL opened a money market placement account with the respondent bearing
MMP No. 084 with an initial placement of US$68,768.60, transferred from MMP No. 063.

On May 19, 1980, the CLL, through Wilfrido Martinez, and the respondent, through Senen L. Matoto
and Michael Sung, Senior Manager of the Money Management Division of the respondent, executed a
letter-agreement in which the existing back-to-back credit facility granted to the CLL... way back in
1979 was extended up to July 1980, and increased to US$5,000,000.

The facility was designed to finance the purchases of molasses made by the CLL from the Philippines
for re-export.[13]

In compliance with the letter-agreement, Wilfrido C. Martinez, Miguel J. Lacson, Ricardo Lopa, and
Ramon Siy executed a continuing suretyship agreement in which they bound and obliged themselves,
jointly and severally, with the CLL to pay the latter's obligation under the said... credit facility.

The petitioner asserts that the trial and appellate courts erred when they held him liable for the
reimbursement of US$340,000 to the respondent. He contends that he is not in actuality a
stockholder of Mar Tierra Corporation, nor a stockholder of the CLL. He was not... involved in any way
in the operations of the said corporations. He added that while he may have signed the signature
cards of MMP Nos. 063 and 084 in blank, he never had any involvement in the management and
disposition of the said accounts, nor of any deposits in or... withdrawals from either or both accounts.
He was not aware of any transactions between the respondent, Wilfrido Martinez, and Gonzales, with
reference to the remittance of the US$340,000 to FCD SA 18402-7; nor did he oblige himself to pay
the said amount to the... respondent. According to the petitioner, there is no evidence that he had
benefited from any of the following: (a) the remittance by the respondent of the US$340,000 to
Account No. FCD SA 18402-7 owned by Mar Tierra Corporation; (b) the money market placements in
MMP Nos.

063 and 084, or, (c) from any deposits in or withdrawals from the said account and money market
placements.

On the other hand, the appellate court found the petitioner and his co-defendants, jointly and
severally, liable to the respondent for the payment of the US$340,000 based on the following findings
of the trial court:

The Court finds that defendant Cintas Largas (Ltd.) with capitalization of $10,000.00 divided into 1,000
shares at HK$10 per share, is a mere paper company with nominee shareholders in Hongkong,
namely: Overseas Nominees Ltd. and Shares Nominees Ltd., with defendants

Wilfrido and Miguel J. Lacson as the sole directors (Exh. A). Since the said shareholders are mere
nominee companies, it would appear that the said defendants Wilfrido and Miguel J. Lacson who are
the sole directors are the real and beneficial shareholders (t.s.n., 9-1-87,... p. 5). Further, defendant
Cintas Largas Ltd. has no real office in Hongkong as it is merely being accommodated by Price
Waterhouse, a large accounting office in Hongkong (t.s.n., 9-1-87, pp. 7-8).

Defendant Cintas Largas Ltd., being a mere alter ego or business conduit for the individual defendants
with no corporate personality distinct and separate from that of its beneficial shareholders and with
no substantial assets in its own name, it is safe to conclude that the... remittance of US$340,000.00
was, in fact, a remittance made for the benefit of the individual defendants. Plaintiff was supposed to
deduct the US$340,000.00 remitted to the foreign currency deposit account from Cintas Largas (Ltd.)
funds or from money market placement... account Nos. 063 and 084 as well as Cintas Largas Ltd.
deposit account

Issues:

whether or not the petitioner is obliged to reimburse to the respondent the principal amount of
US$340,000.

whether or not a corporation is merely an alter ego is purely one of fact

Ruling:

The general rule is that a corporation is clothed with a personality separate and distinct from the
persons composing it. Such corporation may not be held liable for the obligation of the persons
composing it; and neither can its stockholders be held liable for such... obligation.[43] A corporation
has a separate personality distinct from its stockholders and from other corporation to which it may
be connected.[44] This separate and distinct personality of a corporation is a fiction created by law...
for convenience and to prevent injustice.[45]

Nevertheless, being a mere fiction of law, peculiar situations or valid grounds can exist to warrant,
albeit sparingly, the disregard of its independent being and the piercing of the corporate veil.[46]
Thus, the veil of separate corporate personality may... be lifted when such personality is used to
defeat public convenience, justify wrong, protect fraud or defend crime; or used as a shield to
confuse the legitimate issues; or when the corporation is merely an adjunct, a business conduit or
an alter ego of another corporation 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;[47] or when the corporation is used as a cloak or cover for fraud or...
illegality, or to work injustice, or where necessary to achieve equity or for the protection of the
creditors.[48] In such cases where valid grounds exist for piercing the veil of corporate entity, the
corporation will be considered as a mere association of... persons.[49] The liability will directly attach
to them

However, mere ownership by a single stockholder or by another corporation of all or nearly all of
the capital stocks of a corporation is not by itself a sufficient ground to disregard the separate
corporate personality. The substantial identity of the incorporators of two... or more corporations
does not warrantly imply that there was fraud so as to justify the piercing of the writ of corporate
fiction.[51] To disregard the said separate juridical personality of a corporation, the wrongdoing must
be proven clearly and... convincingly.

In this case, the respondent failed to adduce the quantum of evidence necessary to prove any valid
ground for the piercing of the veil of corporate entity of Mar Tierra Corporation, or of RJL for that
matter, and render the petitioner liable for the respondent's claim, jointly... and severally, with
Wilfrido Martinez and Lacson. The mere fact that the majority stockholder of Mar Tierra
Corporation is the RJL, and that the petitioner, along with Jose and Luis Martinez, owned about 42%
of the capital stock of RJL, do not constitute sufficient... evidence that the latter corporation, and/or
the petitioner and his brothers, had complete domination of Mar Tierra Corporation. It does not
automatically follow that the said corporation was used by the petitioner for the purpose of
committing fraud or wrong, or to... perpetrate an injustice on the respondent.

There is no evidence on record that the petitioner had any involvement in the purchases of molasses
by Wilfrido Martinez, Gonzales and Lacson, and the subsequent sale thereof to the CLL, through Mar
Tierra Corporation. On... the contrary, the evidence on record shows that the CLL purchased
molasses from Mar Tierra Corporation and paid for the same through the credit facility granted by the
respondent to the CLL. The CLL, thereafter, made remittances to Mar Tierra Corporation from its
deposit... account and MMP Nos. 063 and 084 with the respondent. The close business relationship
of the two corporations does not warrant a finding that Mar Tierra Corporation was but a conduit of
the CLL.

Likewise, the respondent failed to adduce preponderant evidence to prove that the Mar Tierra
Corporation and the RJL were so organized and controlled, its affairs so conducted as to make the
latter corporation merely an instrumentality, agency, conduit or adjunct of the former... or of
Wilfrido Martinez, Gonzales, and Lacson for that matter, or that such corporations were organized
to defraud their creditors, including the respondent. The mere fact, therefore, that the businesses of
two or more corporations are interrelated is not a justification... for disregarding their separate
personalities, absent sufficient showing that the corporate entity was purposely used as a shield to
defraud creditors and third persons of their rights.

Also, the mere fact that part of the proceeds of the sale of molasses made by Mar Tierra Corporation
to the CLL may have been used by the latter as deposits in its deposit account with the respondent or
in the money market placements in MMP Nos. 063 and 084, or that the funds of

Mar Tierra Corporation and the CLL with the respondent were mingled, and their disposition
controlled by Wilfrido Martinez, does not constitute preponderant evidence that the petitioner,
Wilfrido Martinez and Lacson used the Mar Tierra Corporation and the RJL to defraud the...
respondent. The respondent treated the CLL and Mar Tierra Corporation as separate entities and
considered them as one and the same entity only when Wilfrido C. Martinez and/or Blamar Gonzales
failed to pay the US$340,000 remitted by the respondent to FCD SA

18402-7. This being the case, there is no factual and legal basis to hold the petitioner liable to the
respondent for the said amount.

Contrary to the ruling of the trial court and the appellate court, the auditors of the CLL and the Mar
Tierra Corporation, in their report, did not find the petitioner liable for the respondent's claim in their
report. The auditors, in fact, found the CLL alone liable for... the said amount.[55] Even a cursory
reading of the report will show that the name of the petitioner was not mentioned therein.

Clearly from the foregoing, the withdrawals from the deposit and foreign currency accounts and MMP
Nos. 063 and 084 of the CLL, after the respondent remitted the US$340,000, were for the account of
the CLL and/or Wilfrido Martinez, and not of the petitioner.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of Appeals is
REVERSED AND SET ASIDE. The complaint of the respondent against the petitioner in Civil Case No. C-
10811 is

SO ORDERED.

Principles:

The general rule is that a corporation is clothed with a personality separate and distinct from the
persons composing it. Such corporation may not be held liable for the obligation of the persons
composing it; and neither can its stockholders be held liable for such... obligation.[43] A corporation
has a separate personality distinct from its stockholders and from other corporation to which it may
be connected.[44] This separate and distinct personality of a corporation is a fiction created by law...
for convenience and to prevent injustice.[45]

Nevertheless, being a mere fiction of law, peculiar situations or valid grounds can exist to warrant,
albeit sparingly, the disregard of its independent being and the piercing of the corporate veil.[46]
Thus, the veil of separate corporate personality may... be lifted when such personality is used to
defeat public convenience, justify wrong, protect fraud or defend crime; or used as a shield to
confuse the legitimate issues; or
 when the corporation is merely an adjunct, a business conduit or an alter ego of another
corporation 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;[47]

or when the corporation is used as a cloak or cover for fraud or... illegality, or to work injustice, or
where necessary to achieve equity or for the protection of the creditors.[48] In such cases where
valid grounds exist for piercing the veil of corporate entity, the corporation will be considered as a
mere association of... persons.[49] The liability will directly attach to them.[50]

However, mere ownership by a single stockholder or by another corporation of all or nearly all of the
capital stocks of a corporation is not by itself a sufficient ground to disregard the separate corporate
personality. The substantial identity of the incorporators of two... or more corporations does not
warrantly imply that there was fraud so as to justify the piercing of the writ of corporate fiction.[51]
To disregard the said separate juridical personality of a corporation, the wrongdoing must be proven
clearly and... convincingly.[52]

The test in determining the application of the instrumentality or alter ego doctrine is 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 or... existence 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; and

The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained
of.

The absence of any one of these elements prevents "piercing the corporate veil." In applying the
"instrumentality" or "alter ego" doctrine, the courts are concerned with reality and not form, with
how the corporation operated and the individual defendant's relationship to... that operation.

INTERNATIONAL ACADEMY OF MANAGEMENT v. LITTON, GR No. 191525, 2017-12-13

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.

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, and attorney's fees.

the judgment was not executed.

On 11 November 1996, the sheriff of the MeTC of Manila levied on a piece of real property covered by
Transfer Certificate of Title (TCT) No. 187565 and registered in the name of International Academy of
Management and Economics Incorporated (I/AME), in order to execute the judgment against Santos.

indicated that such was "only up to the extent of the share of Emmanuel T. Santos."

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.
Upon motion for reconsideration of I/AME, the MeTC reversed its earlier ruling and ordered the
cancellation of the annotations of levy as well as the writ of execution.

Petitioner avers that its right to due process was violated when it was dragged into the case and its
real property made an object of a writ of execution in a judgment against Santos.

It argues that since it was not impleaded in the main case, the court a quo never acquired jurisdiction
over it.

Petitioner I/AME argues that the doctrine of piercing the corporate veil applies only to stock
corporations, and not to non-stock, nonprofit corporations such as I/AME since there are no
stockholders to hold liable in such a situation but instead only members. Hence, they do not have
investments or shares of stock or assets to answer for possible liabilities. Thus, no one in a non-stock
corporation can be held liable in case the corporate veil is disregarded or pierced.

The petitioner also insists that the piercing of the corporate veil cannot be applied to a natural person
- in this case, Santos - simply because as a human being, he has no corporate veil shrouding or
covering his person.

Issues:

The issues boil down to the alleged denial of due process when the court pierced the corporate veil of
I/AME and its property was made to answer for the liability of Santos.

Ruling:

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.

There exists, however, 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."

The resistance of the Court to offend the right to due process of a corporation that is a nonparty in a
main case, may disintegrate not only when its director, officer, shareholder, trustee or member is a
party to the main case, but when it finds facts which show that piercing of the corporate veil is
merited.

In determining the propriety of applicability of piercing the veil of corporate fiction, this Court, in a
number of cases, did not put in issue whether a corporation is a stock or non-stock corporation.

In the United States, from which we have adopted our law on corporations, non-profit corporations
are not immune from the doctrine of piercing the corporate veil. Their courts view piercing of the
corporation as an equitable remedy, which justifies said courts to scrutinize any organization however
organized and in whatever manner it operates. Moreover, control of ownership does not hinge on
stock ownership.

As held in Barineau v. Barineau:[36] [t]he mere fact that the corporation involved is a nonprofit
corporation does not by itself preclude a court from applying the equitable remedy of piercing the
corporate veil. The equitable character of the remedy permits a court to look to the substance of the
organization, and its decision is not controlled by the statutory framework under which the
corporation was formed and operated. While it may appear to be impossible for a person to exercise
ownership control over a nonstock, not-for-profit corporation, a person can be held personally liable
under the alter ego theory if the evidence shows that the person controlling the corporation did in
fact exercise control, even though there was no stock ownership.

The concept of equitable ownership, for stock or non-stock corporations, in piercing of the corporate
veil scenarios, may also be considered. An equitable owner is an individual who is a non-shareholder
defendant, who exercises sufficient control or considerable authority over the corporation to the
point of completely disregarding the corporate form and acting as though its assets are his or her
alone to manage and distribute.

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.”

Like Arcilla, Santos: (1) was adjudged liable to pay on a judgment against him; (2) he became
President of a corporation; (3) he formed a corporation to conceal assets which were supposed to pay
for the judgment against his favor; (4) the corporation which has Santos as its President, is being
asked by the court to pay on the judgment; and (5) he may not use as a defense that he is no longer
President of I/AME (although a visit to the website of the school shows he is the current President).

This Court agrees with the CA that I/AME is the alter ego of Santos and Santos - the natural person - is
the alter ego of I/AME. Santos falsely represented himself as President of I/AME in the Deed of
Absolute Sale when he bought the Makati real property, at a time when I/AME had not yet existed.

We borrow from American parlance what is called reverse piercing or reverse corporate piercing or
piercing the corporate veil "in reverse."

"in a traditional veil-piercing action, a court disregards the existence of the corporate entity so a
claimant can reach the assets of a corporate insider. In a reverse piercing action, however, the
plaintiff seeks to reach the assets of a corporation to satisfy claims against a corporate insider."

"Reverse-piercing flows in the opposite direction (of traditional corporate veil-piercing) and makes
the corporation liable for the debt of the shareholders."

It 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.[52] 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.

In the U.S. case Acree v. McMahan,[54] the American court held that "[o]utsider reverse veil-piercing
extends the traditional veil-piercing doctrine to permit a third-party creditor to pierce the veil to
satisfy the debts of an individual out of the corporation's assets."

This notwithstanding, the equitable remedy of reverse corporate piercing or reverse piercing was not
meant to encourage a creditor's failure to undertake such remedies that could have otherwise been
available, to the detriment of other creditors.

GENERAL CREDIT CORPORATION (now PENTA CAPITAL FINANCE CORPORATION), Petitioner, vs.
ALSONS DEVELOPMENT and INVESTMENT CORPORATION and CCC EQUITY
CORPORATION,Respondents.
 FACTS: General Credit Corporation is a finance and investment company which established CCC
franchise companies in different urban centers of the country. Upon securing license to engage also in
quasi-banking activities, CCC Equity Corporation was organized by GCC for the purpose of, among
other things, taking over the operations and management of the various franchise companies.
Respondent Alsons and Alcantara family were also shareholders in GCC franchise companies. Alsons
and Alcantara family sold their shareholdings to Equity for a promissory note payable to bearer
amounting to P2,000,000 with 18% interest per annum at one-year maturity date. Four years later,
Alcantara family then assigned its rights and interests over the bearer note to Alsons. Despite letters
of demand Equity failed to pay Alsons as it no longer have assets or property to settle its obligation
nor being extended financial support by GCC. Hence, Alsons filed a complaint for sum of money
against Equity and GCC with the RTC of Makati. GCC was impleaded a party-defendant under the
doctrine of piercing the veil of corporate fiction alleging that Equity have been organized as a tool and
mere conduit of GCC. GCC answered that it is a distinct and separate entity from Equity. Alson
presented over 60 documentary evidence among which are as follows: Equity and GCC had common
directors/officers as well as stockholders. When [EQUITY’s President] Labayen sold the shareholdings
of EQUITY in said franchise companies, practically the entire proceeds thereof were surrendered to
GCC, and not received by EQUITY . President Villanueva communicated to Equity President Labayen
that GCC Board denied the Alcantaras’ request to be paid out but authorized to pay interest out of
Equity’s operation income. Trial court found Equity as a mere instrumentality or adjunct of GCC and
ruled in favour of Alsons and ordered GCC to pay. On appeal, Court of Appeals rendered decision,
affirming that of the trial court. Having denied the motion for reconsideration, petitioner filed the
present petition.

ISSUE: Whether or not doctrine of piercing GCC’s veil of corporate identity is properly applied.

HELD: YES. Under the doctrine – "piercing the veil of corporate fiction" – as in fact the court will
often look at the corporation as a mere collection of individuals or an aggregation of persons
undertaking business as a group, disregarding the separate juridical personality of the corporation
unifying the group.

Another formulation of this doctrine is that when two (2) business enterprises are owned, conducted
and controlled by the same parties, both law and equity will, when necessary to protect the rights of
third parties, disregard the legal fiction that two corporations are distinct entities and treat them as
identical or one and the same. Authorities are agreed on at least three

(3) basic areas where piercing the veil, with which the law covers and isolates the corporation from
any other legal entity to which it may be related, is allowed. 25 These are: 1) defeat of public
convenience; 2) fraud ; or 3) alter ego cases Per the Court’s count, the trial court enumerated no less
than 20 documented circumstances and transactions, which, taken as a package, strongly supported
the conclusion that respondent EQUITY was but an adjunct, an instrumentality or business conduit of
petitioner GCC. This relation, in turn, provides a justifying ground to pierce petitioner’s corporate
existence as to ALSONS’ claim in question.

Foremost of what the trial court referred to as "certain circumstances" are the commonality of
directors, officers and stockholders and even sharing of office between petitioner GCC and
respondent EQUITY; certain financing and management arrangements between the two, allowing
the petitioner to handle the funds of the latter; the virtual domination if not control wielded by the
petitioner over the finances, business policies and practices of respondent EQUITY; and the
establishment of respondent EQUITY by the petitioner to circumvent CB rules.

As the relationships binding herein [respondent EQUITY and petitioner GCC] have been that of
"parent subsidiary corporations" the foregoing principles and doctrines find suitable applicability in
the case at bar; and, it having been satisfactorily and indubitably shown that the said relationships
had been used to perform certain functions not characterized with legitimacy, this Court … feels
amply justified to "pierce the veil of corporate entity". GCC was the entity which initiated and
benefited immensely from the fraudulent scheme perpetrated in violation of the law. It behooves the
petitioner, as a matter of law and equity, to assume the legitimate financial obligation of a cash-
strapped subsidiary corporation which it virtually controlled to such a degree that the latter became
its instrument or agent. The instant petition is DENIED.

CONCEPT BUILDERS, INC., petitioner,

vs.
THE NATIONAL LABOR RELATIONS COMMISSION, (First Division); and Norberto Marabe; Rodolfo
Raquel, Cristobal Riego, Manuel Gillego, Palcronio Giducos, Pedro Aboigar, Norberto Comendador,
Rogelio Salut, Emilio Garcia, Jr., Mariano Rio, Paulina Basea, Alfredo Albera, Paquito Salut, Domingo
Guarino, Romeo Galve, Dominador Sabina, Felipe Radiana, Gavino Sualibio, Moreno Escares,
Ferdinand Torres, Felipe Basilan, and Ruben Robalos, respondents.

G.R. No. 108734

29 May 1996

Facts:
Concept Builders, Inc., (CBI), a domestic corporation, with principal office at 355 Maysan Road,
Valenzuela, Metro Manila, is engaged in the construction business while Norberto Marabe; Rodolfo
Raquel, Cristobal Riego, Manuel Gillego, Palcronio Giducos, Pedro Aboigar, Norberto Comendador,
Rogelio Salut, Emilio Garcia, Jr., Mariano Rio, Paulina Basea, Alfredo Albera, Paquito Salut, Domingo
Guarino, Romeo Galve, Dominador Sabina, Felipe Radiana, Gavino Sualibio, Moreno Escares,
Ferdinand Torres, Felipe Basilan, and Ruben Robalos were employed by said company as laborers,
carpenters and riggers. On November 1981, Marabe, et. al. were served individual written notices of
termination of employment by CBI, effective on 30 November 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. The National Labor Relations Commission (NLRC)
found it to be, the fact, however, that at the time of the termination of Marabe, et.al.’s employment,
the project in which they were hired had not yet been finished and completed. CBI had to engage the
services of sub-contractors whose workers performed the functions of Marabe, et. al. Aggrieved,
Marabe, et. al. filed a complaint for illegal dismissal, unfair labor practice and non-payment of their
legal holiday pay, overtime pay and thirteenth-month pay against CBI.

On 19 December 1984, the Labor Arbiter rendered judgment ordering CBI to reinstate Marabe et. al.
and to pay them back wages equivalent to 1 year or 300 working days. On 27 November 1985, the
NLRC dismissed the motion for reconsideration filed by CBI on the ground that the said decision had
already become final and executory. On 16 October 1986, the NLRC Research and Information
Department made the finding that Marabe, et. al.’s back wages amounted to P199,800.00. On 29
October 1986, the Labor Arbiter issued a writ of execution directing the sheriff to execute the
Decision, dated 19 December 1984.

The writ was partially satisfied through garnishment of sums from CBI’s debtor, the Metropolitan
Waterworks and Sewerage Authority, in the amount of P81,385.34. Said amount was turned over to
the cashier of the NLRC. On 1 February 1989, an Alias Writ of Execution was issued by the Labor
Arbiter directing the sheriff to collect from CBI the sum of P117,414.76, representing the balance of
the judgment award, and to reinstate Marabe, et. al. to their former positions. On 13 July 1989, the
sheriff issued a report stating that he tried to serve the alias writ of execution on petitioner through
the security guard on duty but the service was refused on the ground that CBI no longer occupied the
premises.

On 26 September 1986, upon motion of Marabe, et. al., the Labor Arbiter issued a second alias writ of
execution. The said writ had not been enforced by the special sheriff because, as stated in his
progress report dated 2 November 1989, that all the employees inside CBI’s premises claimed that
they were employees of Hydro Pipes Philippines, Inc. (HPPI) and not by CBI; that levy was made upon
personal properties he found in the premises; and that security guards with high-powered guns
prevented him from removing the properties he had levied upon. The said special sheriff
recommended that a “break-open order” be issued to enable him to enter CBI’s premises so that he
could proceed with the public auction sale of the aforesaid personal properties on 7 November 1989.
On 6 November 1989, a certain Dennis Cuyegkeng filed a third-party claim with the Labor Arbiter
alleging that the properties sought to be levied upon by the sheriff were owned by HPPI, of which he
is the Vice-President.

On 23 November 1989, Marabe, et. al. filed a “Motion for Issuance of a Break-Open Order,” alleging
that HPPI and CBI were owned by the same incorporator/stockholders. They also alleged that
petitioner temporarily suspended its business operations in order to evade its legal obligations to
them and that Marabe, et. al. were willing to post an indemnity bond to answer for any damages
which CBI and HPPI may suffer because of the issuance of the break-open order. On 2 March 1990,
the Labor Arbiter issued an Order which denied Marabe’s motion for break-open order. Marabe, et.
al. then appealed to the NLRC. On 23 April 1992, the NLRC set aside the order of the Labor Arbiter,
issued a break-open order and directed Marabe, et. al. to file a bond.

Thereafter, it directed the sheriff to proceed with the auction sale of the properties already levied
upon. It dismissed the third-party claim for lack of merit. CBI moved for reconsideration but the
motion was denied by the NLRC in a Resolution, dated 3 December 1992.

Hence, the petition.

Issue:
Whether the NLRC was correct in issuing the break-open order to levy the “HPPI properties” located
at CBI amd/or HPPI’s premises at 355 Maysan Road, Valenzuela, Metro Manila.

Held:
It is a fundamental principle of corporation law that a corporation is an entity separate and distinct
from its stockholders and from other corporations to which it may be connected. But, this separate
and distinct personality of a corporation is merely a fiction created by law for convenience and to
promote justice. So, when the notion of separate juridical personality is used to defeat public
convenience, justify wrong, protect fraud or defend crime, or is used as a device to defeat the labor
laws, this separate personality of the corporation may be disregarded or the veil of corporate fiction
pierced. This is true likewise when the corporation is merely an adjunct, a business conduit or an alter
ego of another corporation. The conditions under which the juridical entity may be disregarded vary
according to the peculiar facts and circumstances of each case.

No hard and fast rule can be accurately laid down, but certainly, there are some probative factors of
identity that will justify the application of the doctrine of piercing the corporate veil, to wit:

Stock ownership by one or common ownership of both corporations;

Identity of directors and officers;
The manner of keeping corporate books and records; and
Methods of conducting the business.

The SEC en banc explained the “instrumentality rule” which the courts have applied in disregarding
the separate juridical personality of corporations as “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 is 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 or existence 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; and
The aforesaid control and breach of duty must proximately cause the injury or unjust loss
complained of.
The absence of any one of these elements prevents “piercing the corporate veil.”

In applying the “instrumentality” or “alter ego” doctrine, the courts are concerned with reality and
not form, with how the corporation operated and the individual defendant’s relationship to that
operation. Thus the question of whether a corporation is a mere alter ego, a mere sheet or paper
corporation, a sham or a subterfuge is purely one of fact.

Here, while CBI claimed that it ceased its business operations on 29 April 1986, it filed an
Information Sheet with the Securities and Exchange Commission on 15 May 1987, stating that its
office address is at 355 Maysan Road, Valenzuela, Metro Manila. On the other hand, HPPI, the
third-party claimant, submitted on the same day, a similar information sheet stating that its office
address is at 355 Maysan Road, Valenzuela, Metro Manila. Further, both information sheets were
filed by the same Virgilio O. Casiño as the corporate secretary of both corporations. Both
corporations had the same president, the same board of directors, the same corporate officers, and
substantially the same subscribers.

From the foregoing, it appears that, among other things, the CBI and the HPPI shared the same
address and/or premises. Under these circumstances, it cannot be said that the property levied
upon by the sheriff were not of CBI’s. Clearly, CBI ceased its business operations in order to evade
the payment to Marabe, et. al. of back wages and to bar their reinstatement to their former
positions. HPPI is obviously a business conduit of CBI and its emergence was skillfully orchestrated to
avoid the financial liability that already attached to CBI.

MANUEL M. MENDOZA v. BANCO REAL DEVELOPMENT BANK, GR NO. 140923, 2005-09-16

Facts:
On September 11, 1985, respondent bank extended a loan of P500,000.00 to TVI. In his capacity as
General Manager, petitioner Mendoza executed a promissory note and chattel mortgage over 195
units of Beta video machines and their equipment and accessories belonging to TVI... in favor of
respondent bank.

On October 3, 1986, TVI and two other video firms, Fox Video and Galactica Video, organized a new
corporation named FGT Video Network Inc. (FGT). It was registered with the Securities and Exchange
Commission.[3] Petitioner Mendoza was the concurrent

President of FGT and Operating General Manager of TVI. Thus, the office of TVI had to be transferred
to the building of FGT for easier monitoring of the distribution and marketing aspects of the business.

For TVI's failure to pay its loan upon maturity, respondent bank, on January 26, 1987, filed with the
Office of the Clerk of Court of the Regional Trial Court (RTC), Pasay City, a petition for Extra Judicial
Foreclosure and Sale of Chattel Mortgage.

However, the Sheriff's Report/Return[4] dated January 27, 1987 shows that TVI is no longer doing
business at its given address; that its General Manager, Mr. Manuel M. Mendoza, is presently
employed at FGT Video Network with offices at the Philcemcor Bldg.,... No. 4 Edsa cor. Connecticut
St., Greenhills, San Juan, Metro Manila; that when asked about the whereabouts of the video
machines, in the presence of the representative of respondent bank and its counsel, Mr. Mendoza
denied any knowledge of their whereabouts; and that ... action on respondent's petition is indefinitely
postponed until further notice from the bank.

Respondent then wrote TVI demanding the surrender of the video machines. In his letter dated
February 19, 1987, petitioner Mendoza requested the bank to give him "additional time to enable us
to pay our total obligations" and proposed a repayment scheme to start not later... than March 10,
1987.[5] Still, no payment was received by the bank. TVI simply refused and ignored the demand and
kept silent as to the whereabouts of the video machines.

Meanwhile, in a case entitled "Republic of the Philippines, plaintiff vs. FGT Video Network Inc.,
Manuel Mendoza, Alfredo C. Ongyangco, Eric Apolonio, Susan Yang ang Eduardo A. Yotoko,
defendants," the RTC, Branch 167, Pasig City issued a search... warrant. The agents of the National
Bureau of Investigation (NBI) confiscated at the offices of FGT 638 machines and equipment including
the 195 Beta machines mortgaged with respondent bank.

On May 29, 1987, upon motion of FGT and herein petitioners, the same court issued another Order
directing the NBI to release and return the said machines to them.

However, Columbia Pictures Inc., Orion Pictures Corp., Paramount Pictures Corp., Universal City
Studios Inc., The Walt Disney Company and Warner Bros. filed with this Court a petition for
certiorari[6] assailing the Order of the lower court.

On June 18, 1987, this Court issued a temporary restraining order enjoining the RTC from enforcing its
assailed order. The machines and equipment were left in the custody of the NBI until the petition for
certiorari shall have been resolved with finality.

On July 13, 1990, respondent bank filed with the RTC, Branch 110, Pasig City,[7] a complaint for
collection of a sum of money[8] against TVI, FGT and petitioners. Only petitioners filed their joint
answer to the complaint.

In their joint answer, petitioners specifically denied the allegations in the complaint, raising the
defense that the loan is purely a corporate indebtedness of TVI.

Issues:

whether herein petitioners are personally liable for TVI's indebtedness of P500,000.00 with
respondent bank.

Ruling:

Bo... oth the trial court and the Appellate Court found that the petitioners transferred the Beta
video machines from TVI to FGT without the consent of respondent bank. Also, upon inquiry of the
sheriff, petitioner Mendoza declined knowledge of the whereabouts of the mortgaged... video
machines. Moreover, the fact that the NBI seized the video machines from FGT glaringly shows that
petitioners transferred the same from TVI. More importantly, a comparison of the list of video
machines in the Chattel Mortgage Contract and the list of video machines... seized by the NBI from
FGT shows that they have the same serial numbers.

The courts below also found that TVI is petitioners' mere alter ego or business conduit. They control
the affairs of TVI. Among its stockholders or directors, they were the only ones who became
incorporators of FGT. They transferred the assets of TVI to FGT.

The general rule is that obligations incurred by a corporation, acting through its directors, officers or
employees, are its sole liabilities. However, the veil with which the law covers and isolates the
corporation from its directors, officers or employees will be lifted when... the corporation is used by
any of them as a cloak or cover for fraud or illegality or injustice.[9] Here, the fraud was committed
by petitioners to the prejudice of respondent bank. It bears emphasis that as reported by the sheriff,
TVI is no longer... doing business at its given address and its whereabouts cannot be established as
yet.

Both the trial court and the Court of Appeals thus concluded that petitioners succeeded to hide the
chattels, preventing the sheriff to foreclose the mortgage. Obviously, they acted in bad faith to
defraud respondent bank.

In fine, we hold that the Appellate Court, in affirming the Decision of the trial court, correctly ruled
that petitioners, not TVI, are the ones personally liable to respondent bank for the payment of the
loan.

Both the trial court and the Appellate Court found that the petitioners transferred the Beta video
machines from TVI to FGT without the consent of respondent bank. Also, upon inquiry of the sheriff,
petitioner Mendoza declined knowledge of the whereabouts of the mortgaged... video machines.
Moreover, the fact that the NBI seized the video machines from FGT glaringly shows that petitioners
transferred the same from TVI. More importantly, a comparison of the list of video machines in the
Chattel Mortgage Contract and the list of video machines... seized by the NBI from FGT shows that
they have the same serial numbers.

The courts below also found that TVI is petitioners' mere alter ego or business conduit. They
control the affairs of TVI. Among its stockholders or directors, they were the only ones who
became incorporators of FGT. They transferred the assets of TVI to FGT.

The general rule is that obligations incurred by a corporation, acting through its directors, officers or
employees, are its sole liabilities. However, the veil with which the law covers and isolates the
corporation from its directors, officers or employees will be lifted when... the corporation is used by
any of them as a cloak or cover for fraud or illegality or injustice.[9] Here, the fraud was committed by
petitioners to the prejudice of respondent bank. It bears emphasis that as reported by the sheriff, TVI
is no longer... doing business at its given address and its whereabouts cannot be established as yet.

Both the trial court and the Court of Appeals thus concluded that petitioners succeeded to hide the
chattels, preventing the sheriff to foreclose the mortgage. Obviously, they acted in bad faith to
defraud respondent bank.

In fine, we hold that the Appellate Court, in affirming the Decision of the trial court, correctly ruled
that petitioners, not TVI, are the ones personally liable to respondent bank for the payment of the
loan.

CIR v. DOMINADOR MENGUITO, GR No. 167560, 2008-09-17

Facts:

Dominador Menguito [herein respondent] is a Filipino citizen, of legal age, married to Jeanne
Menguito and is engaged in the restaurant and/or cafeteria business. For the years 1991, 1992 and
1993, its principal place of business was at Gloriamaris, CCP Complex, Pasay City and later transferred
to Kalayaan Bar (Copper Kettle Cafeteria Specialist or CKCS), Departure Area, Ninoy Aquino
International Airport, Pasay City. During the same years, he also operated a branch at Club John Hay,
Baguio City carrying the business name of Copper Kettle Cafeteria Specialist (Joint Stipulation of Facts
and Admissions,

Subsequently, BIR Baguio received information that Petitioner [herein respondent] has undeclared
income from Texas Instruments and Club John Hay, prompting the BIR to conduct another
investigation. Through a letter dated July 28, 1997, Spouses Dominador Menguito and Jeanne
Menguito (Spouses Menguito) were informed by the Assessment Division of the said office that they
have underdeclared sales totaling P48,721,555.96 (Exhibit 11, p. 83, BIR records). This was followed
by a Preliminary Ten (10) Day Letter dated August 11, 1997, informing Petitioner

[herein respondent] that in the investigation of his 1991, 1992 and 1993 income, business and
withholding tax case, it was found out that there is still due from him the total sum of P34,193,041.55
as deficiency income and percentage tax.

On September 2, 1997, the assessment notices subject of the instant petition were issued. These were
protested by Ms. Jeanne Menguito, through a letter dated September 28, 1997 (Exhibit 14, p. 112, BIR
Records), on the ground that the 40% deduction allowed on their... computed gross revenue, is
unrealistic. Ms. Jeanne Menguito requested for a period of thirty (30) days within which to coordinate
with the BIR regarding the contested assessment

In an effort to clear an alleged confusion regarding Copper Kettle Cafeteria Specialist (CKCS) being a
sole proprietorship owned by the Spouses, and Copper Kettle Catering Services, Inc. (CKCS, Inc.)
being a corporation with whom Texas Instruments and Club John Hay entered... into a contract,
Petitioner [respondent] submitted to BIR Baguio a photocopy of the SEC Registration of Copper Kettle
Catering Services, Inc. on March 23, 1999 (pp. 134-141, BIR Records).

On April 12, 1999, BIR Baguio wrote a letter to Spouses Menguito, informing the latter that a
reinvestigation or reconsideration cannot be given due course by the mere submission of an
uncertified photocopy of the Certificate of Incorporation. Thus, it avers that the amendment... issued
is still valid and enforceable.

On May 26, 1999, Petitioner [respondent] filed the present case, praying for the cancellation and
withdrawal of the deficiency income tax and percentage tax assessments on account of prescription,
whimsical factual findings, violation of procedural due process on the issuance of... assessment
notices, erroneous address of notices and multiple credit/ investigation by the Respondent
[petitioner] of Petitioner's [respondent's] books of accounts and other related records for the same
tax year.

Through a Petition for Review[8] filed with the CA, respondent questioned the CTA Decision and
Resolution mainly on the ground that Copper Kettle Catering Services, Inc. (CKCS, Inc.) was a
separate and distinct entity from Copper Kettle Cafeteria Specialist

(CKCS); the sales and revenues of CKCS, Inc. could not be ascribed to CKCS; neither may the taxes due
from one, charged to the other; nor the notices to be served on the former, coursed through the
latter.[9] Respondent cited the Joint Stipulation in which... petitioner acknowledged that its
(respondent's) business was called Copper Kettle Cafeteria Specialist, not Copper Kettle Catering
Services, Inc.[10]

Issues:

whether or not there is substantial evidence that CKCS, Inc. and CKCS are one and the same taxable
entity..

Ruling:

The Court finds that the CA gravely erred when it ignored the substantial evidence on record and
reversed the CTA.

In a number of cases, the Court has shredded the veil of corporate identity and ruled that where a
corporation is merely an adjunct, business conduit or alter ego of another corporation or when they
practice fraud on our internal revenue laws,[29] the fiction of their separate and distinct corporate
identities shall be disregarded, and both entities treated as one taxable person, subject to
assessment for the same taxable transaction.
The Court considers the presence of the following circumstances, to wit: when the owner of one
directs and controls the operations of the other, and the payments effected or received by one are
for the accounts due from or payable to the other;30 or when the properties or products of one are
all sold to the other, which in turn immediately sells them to the public,[31] as substantial evidence
in support of the finding that the two are actually one juridical taxable personality.

In the present case, overwhelming evidence supports the CTA in disregarding the separate identity of
CKCS, Inc. from CKCS and in treating them as one taxable entity.

First, in respondent’s Petition for Review before the CTA, he expressly admitted that he "is engaged
in restaurant and/or cafeteria business" and that "[i]n 1991, 1992 and 1993, he also operated a
branch at Club John Hay, Baguio City with a business name of Copper Kettle Cafeteria Specialist."32
Respondent repeated such admission in the Joint Stipulation.33 And then in Exhibit "1"34 for
petitioner, a July 18, 1994 letter sent by Jeanne Menguito to BIR, Baguio City, she stated thus: "in
connection with the investigation of Copper Kettle Cafeteria Specialist which is located at 19th Tee
Club John Hay, Baguio City under letter of authority nos. 0392897, 0392898, and 0392690 dated
May 16, 1994, investigating my income, business, and withholding taxes for the years 1991, 1992,
and 1993."35 (Emphasis supplied)

Jeanne Menguito signed the letter as proprietor of Copper Kettle Cafeteria Specialist.36

Related to Exhibit "1" is petitioner's Exhibit "14," which is another letter dated September 28, 1997,
in which Jeanne Menguito protested the September 2, 1997 assessment notices directed at Copper
Kettle Cafeteria Specialist and referred to the latter as "our business at 19th Tee Club John Hay and
at Texas Instruments."37 Taken along with the Joint Stipulation, Exhibits "A" through "C" and the
August 3, 1993 Certification of Camp John Hay, Exhibits "1" and "14," confirm that respondent,
together with his spouse Jeanne Menguito, own, operate and manage a branch of Copper Kettle
Cafeteria Specialist, also called Copper Kettle Catering Services at Camp John Hay.

Moreover, in Exhibits "A" to "A-1,"38 Exhibits "B" to "B-1"39 and Exhibits "C" to "C-1"40 which are
lists of concessionaires that operated in Club John Hay in 1992, 1993 and 1991, respectively,41 it
appears that there is no outlet with the name "Copper Kettle Cafeteria Specialist" as claimed by
respondent. The name that appears in the lists is "19th TEE CAFETERIA (Copper Kettle, Inc.)."
However, in the light of the express admission of respondent that in 1991, 1992 and 1993, he
operated a branch called Copper Kettle Cafeteria Specialist in Club John Hay, the entries in Exhibits
"A" through "C" could only mean that said branch refers to "19th Tee Cafeteria (Copper Kettle, Inc.)."
There is no evidence presented by respondent that contradicts this conclusion.

In addition, the August 9, 1993 Certification issued by Club John Hay that "COPPER KETTLE CATERING
SERVICES owned and managed by MS. JEANNE G. MENGUITO is a concessionaire in John Hay since
July 1991 up to the present and is operating the outlet 19TH TEE CAFETERIA AND THE TEE BAR"42
convincingly establishes that respondent's branch which he refers to as Copper Kettle Cafeteria
Specialist at Club John Hay also appears in the latter's records as "Copper Kettle Catering Services"
with an outlet called "19th Tee Cafeteria and The Tee Bar."

Second, in Exhibit "8"43 and Exhibit "E,"44 Texas Instruments identified the concessionaire
operating its canteen as "Copper Kettle Catering Services, Inc."45 and/or "COPPER KETTLE
CAFETERIA SPECIALIST SVCS."46 It being settled that respondent's "Copper Kettle Cafeteria
Specialist" is also known as "Copper Kettle Catering Services," and that respondent and Jeanne
Menguito both own, manage and act as proprietors of the business, Exhibit "8" and Exhibit "E"
further establish that, through said business, respondent also had taxable transactions with Texas
Instruments.

In view of the foregoing facts and circumstances, the Articles of Incorporation of CKCS, Inc. -- a
certified true copy of which respondent attached only to his Reply filed with the CA47 -- cannot
insulate it from scrutiny of its real identity in relation to CKCS. It is noted that said Articles of
Incorporation of CKCS, Inc. was issued in 1989, but documentary evidence indicate that after said
date, CKCS, Inc. has also assumed the name CKCS, and vice-versa. The most concrete indication of
this practice is the 1991 Quarterly Percentage Tax Returns covering the business name/trade "19th
Tee Camp John Hay." In said returns, the taxpayer is identified as "Copper Kettle Cafeteria
Specialist"48 or CKCS, not CKCS, Inc. Yet, in several documents already cited, the purported owner of
19th Tee Bar at Club John Hay is CKCS, Inc.

All these pieces of evidence buttress the finding of the CTA that in 1991, 1992 and 1993, respondent,
together with his spouse Jeanne Menguito, owned and operated outlets in Club John Hay and Texas
Instruments under the names Copper Kettle Cafeteria Specialist or CKCS and Copper Kettle Catering
Services or Copper Kettle Catering Services, Inc..

IBIANO O. REYNOSO, IV, petitioner,

vs.
HON. COURT OF APPEALS and GENERAL CREDIT CORPORATION, respondents.

345 SCRA 335

Nov. 22, 2000

Facts:

Commercial Credit Corporation (CCC), a financing & investment firm, decided to organize franchise
companies in different parts of the country, wherein it shall hold 30% equity. Employees of CCC were
designated as resident managers of the franchise companies – Bibiano Reynoso IV was resident
manager in CCC-QC.
Due to the Central Bank DOSRI Rule prohibiting lending of funds by a corporation to its directors,
officers, Share Holders & other persons with related interests therein, CCC decided to form CCC Equity
Corporation, a wholly-owned subsidiary to which CCC transferred its 30% equity in CCC-QC together
with 2 seats on the BoD. In the new set-up, several employees of CCC became employees of CCC-
Equity.

A complaint for a sum of money was later field by CCC-QC against Reynoso, who in the meantime was
dismissed from CCC-Equity, & wife for embezzlement of funds which were used to buy a house in
Valle Verde. Reynoso claims the money he used represented his money placements in CCC-QC shown
by 23 checks he issued to CCC-QC.

RTC dismissed the case against Reynoso and found his counterclaim for damages to be meritorious
hence granted it. For failing to pay the docket fees, CCC-QC’s appeal to the IAC was dismissed hence
the RTC decision became final & executory. However, the judgment became remained unsatisfied
prompting Reynoso to file a Motion for Alias Writ of Execution. CCC-QC opposed saying that its
premises & records had been taken over by CCC.

CCC meanwhile became known as General Credit Corporation. So, when the RTC ordered GCC to file
its comment on the petition of Reynoso, it claimed that it was not a party to the case & Reynoso
should direct his claim against CCC-QC. Reynoso replied saying that CCC-QC is in adjunct
instrumentality, conduit & agency of CCC & invoked the ruling in Ramoso v. GCC where the SC
declared that GCC, CCC-Equity & other franchised companies including CCC-QC were declared as 1
corp. Reynoso claimed that GCC is just the new name of CCC hence both should be treated as 1
entity. Cases were filed in the RTC of Pasig & QC to levy on the properties of GCC. CA on the other
hand enjoins the auction sale of the properties.

Issue:

WON the piercing the veil of corporate fiction was proper.

Held:
corporation is an artificial being created by operation of law, having the right of succession and the
powers, attributes, and properties expressly authorized by law or incident to its existence.17 It is an
artificial being invested by law with a personality separate and distinct from those of the persons
composing it as well as from that of any other legal entity to which it may be related.18 It was evolved
to make possible the aggregation and assembling of huge amounts of capital upon which big business
depends. It also has the advantage of non-dependence on the lives of those who compose it even as it
enjoys certain rights and conducts activities of natural persons.

Precisely because the corporation is such a prevalent and dominating factor in the business life of the
country, the law has to look carefully into the exercise of powers by these artificial persons it has
created.

Any piercing of the corporate veil has to be done with caution. However, the Court will not hesitate
to use its supervisory and adjudicative powers where the corporate fiction is used as an unfair
device to achieve an inequitable result, defraud creditors, evade contracts and obligations, or to
shield it from the effects of a court decision. The corporate fiction has to be disregarded when
necessary in the interest of justice.

In First Philippine International Bank v. Court of Appeals, et al.,19 we held:

When the fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle for the
evasion of an existing obligation, the circumvention of statutes, the achievement or perfection of a
monopoly or generally the perpetration of knavery or crime, the veil with which the law covers and
isolates the corporation from the members or stockholders who compose it will be lifted to allow for
its consideration merely as an aggregation of individuals.

Also in the above-cited case, we stated that this Court has pierced the veil of corporate fiction in
numerous cases where it was used, among others, to avoid a judgment credit;20 to avoid inclusion
of corporate assets as part of the estate of a decedent;21 to avoid liability arising from debt;22
when made use of as a shield to perpetrate fraud and/or confuse legitimate issues;23 or to
promote unfair objectives or otherwise to shield them.24

CA decision reversed and set aside. Injunction against levying on properties of GCC & their auction
sale lifted. The use by CCC-QC of the same name of Commercial Credit Corporation was intended to
publicly identify it as a component of the CCC group of companies engaged in one & the same
business: investment & financing. When the mother corporation & its subsidiary corporations cease
to act in good faith and honest business judgment, when the corporate fiction is used to perpetuate
fraud or promote injustice, the law steps in to remedy the injustice. The corporate character is not
necessarily abrogated. It continues for legitimate objectives; however pierced, to remedy injustices.

A court judgment becomes useless & ineffective if the employer, in this case CCC as a mother
corporation, is placed beyond the legal reach of the judgment creditor who after protracted litigation,
has been found entitled to positive relief. Courts have been organized to put an end to controversy.
This should not be negated by an inapplicable and wrong use of the fiction of the corporate veil.

The defense of separateness will be disregarded where the business affairs of a subsidiary
corporation are so controlled by the mother corporation to the extent that it becomes an
instrument or agent of its parent. But even when there us dominance over the affairs of the
subsidiary, the doctrine of piercing the veil of corporate fiction applies only when used to defeat
public convenience, justify wrong, protect fraud, or defend crime.

Factually and legally, CCC had dominant control of the business operations of CCC-QC:
The exclusive management contract insured that CCC-QC would be managed & controlled by CCC &
not deviate from the commands of the mother corporation;
CCC appointed its own employee as the resident manager of CCC-QC;
Salaries, pensions, benefits, etc were from CCC, which later became GCC;
Unity of interest, management, control, intensive auditing function of CCC over CCC-QC, sharing of
office space; and
Lawyers of the CCC-QC case were all in-house counsels of CCC

PNB v. Ritratto Group, Inc.

G.R. No. 142616, July 31, 2001
Corporation Law Case Digest by John Paul C. Ladiao (15 March 2016)
(Topic: Right to bring action, acquire and possess property --- relate with Art. 46 of NCC)

FACTS:

On May 29, 1996, 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. This credit facility was later increased successively to US$1,140,000.00 in September
1996; to S$1,290,000.00 in November 1996; to US$1,425,000.00 in February 1997; and decreased to
S$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 Hong Kong.

However, as of April 30, 1998, their outstanding obligations stood at US$1,497,274.70. Pursuant to
the terms of the real estate mortgages, 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.

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 Regional Trial Court of Makati.
The Executive Judge of the Regional Trial Court of Makati issued a 72-hour temporary restraining
order.

On June 25, 1999, petitioner filed a motion to dismiss on the grounds of failure to state a cause of
action and the absence of any privity between the petitioner and respondents. 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.

PNB-IFL is a wholly owned subsidiary of defendant Philippine National Bank, the suit against the
defendant PNB is a suit against PNB-IFL.

respondents sought to enjoin and restrain PNB from the foreclosure and eventual sale of the property
in order to protect their rights to said property by reason of void credit facilities as bases for the real
estate mortgage over the said property.8

The contract questioned is one entered into between respondent and PNB-IFL, not PNB.

ISSUE:

Whether or not respondents justified the act 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?
HELD:

No.

we have held that the doctrine of piercing the corporate veil is an equitable doctrine developed to
address situations where the separate corporate personality of a corporation is abused or used for
wrongful purposes. The doctrine applies when the 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.15

In Concept Builders, Inc. v. NLRC,16 we have laid the test in determining the applicability of the
doctrine of piercing the veil of corporate fiction, to wit:

1. Control, not mere majority or complete control, but complete domination, not only of finances but
of policy and business practice in respect to the transaction attacked so that the corporate entity as to
this transaction had at the time no separate mind, will or existence of its own.

2. Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the
violation of a statutory or other positive legal duty, or dishonest and, unjust act in contravention of
plaintiffs legal rights; and,

3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss
complained of.

The absence of any one of these elements prevents "piercing the corporate veil." In applying the
"instrumentality" or "alter ego" doctrine, the courts are concerned with reality and not form, with
how the corporation operated and the individual defendant's relationship to the operation.17

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. Neither is there a demonstration that any of the evils sought to be prevented by the
doctrine of piercing the corporate veil exists. Inescapably, therefore, the doctrine of piercing the
corporate veil based on the alter ego or instrumentality doctrine finds no application in the case at
bar.

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. Under the Rules of Court, every action must be
prosecuted or defended in the name of the real party-in-interest, unless otherwise authorized by
law or these Rules.18 In mandatory terms, the Rules require that "parties-in-interest without whom
no final determination can be had, an action shall be joined either as plaintiffs or defendants."19 In
the case at bar, the injunction suit is directed only against the agent, not the principal.

espondents do not have a cause of action against the petitioner as the latter is not privy to the
contract the provisions of which respondents seek to declare void. Accordingly, the case before the
Regional Trial Court must be dismissed and the preliminary injunction issued in connection
therewith, must be lifted.////

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 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.