9. Lipat v.

Pacific Bank Corporation (PBC)

FACTS:

1. BET; Mystical Fashions

2. SPA to Teresita Lipat by Mrs. Lipat to obtain loans, other credit accommodations and
mortgage contracts (as security) from respondent Pacific Bank

3. 1979: Teresita secured a loan for Mrs. Lipat and BET to buy fabrics manufactured by BET
and to be sent to Mystical Fashion in USA amounting to P583,854.00. They mortgaged (REM)
the Cubao Property (BET principal office).

4. Bela Export Trading incorporated to Bela Export Corporation.

5. Its incorporators and directors included the Lipat spouses who owned a combined 300
shares out of the 420 shares subscribed, Teresita Lipat who owned 20 shares, and other close
relatives and friends.
6. Mrs. Lipat became BEC President. Teresita became VP and GM.
7. Loans were not met.
8. Property sold at public auction. Respondent Trinidad as highest bidder.
9. RTC: Alter ego or business conduit. BET and BEC one and the same time. Piercing of
corporate veil. Petitioners estopped from claiming separate personality for it is contrary to good
faith.
9.1. It also found unnecessary a board resolution authorizing Teresita Lipat to secure loans from
Pacific Bank on behalf of BEC because the corporation’s by-laws allowed such conduct even
without a board resolution.
Finally, the Court of Appeals ruled that the mortgage property was not only liable for the original
loan of P583,854.00 but likewise for the value of the promissory notes, trust receipt, and export
bills as the mortgage contract equally applies to additional or new loans, discounting lines,
overdrafts, and credit accommodations which petitioners subsequently obtained from Pacific
Bank.
10. CA: Agrees with RTC.

Issues:
1. WON the doctrine of piercing the veil of corporate fiction is applicable in this case. Yes.
2. WON petitioners’ property under the real estate mortgage is liable not only for the amount of
P583,854.00 but also for the value of the promissory notes, trust receipt, and export bills
subsequently incurred by BEC. Yes.
Held: A careful reading of the judgment of the RTC and the resolution of the appellate court
show that in finding petitioners’ mortgaged property liable for the obligations of BEC, both courts
below relied upon the alter ego doctrine or instrumentality rule, rather than fraud in piercing the
veil of corporate fiction. When the corporation is the mere alter ego or business conduit of a
person, the separate personality of the corporation may be disregarded. This is commonly
referred to as the “instrumentality rule” or the alter ego doctrine, which the courts have applied
in disregarding the separate juridical personality of corporations.
In this case, Teresita Lipat had dealt with Pacific Bank on the mortgage contract by virtue of a
special power of attorney executed by Estelita Lipat. Recall that Teresita Lipat acted as the
manager of both BEC and BET and had been deciding business matters in the absence of
Estelita Lipat. Further, the export bills secured by BEC were for the benefit of “Mystical Fashion”
owned by Estelita Lipat. Hence, Pacific Bank cannot be faulted for relying on the same authority
granted to Teresita Lipat by Estelita Lipat by virtue of a special power of attorney.