Sie sind auf Seite 1von 22

21. PHILIPPINE NATIONAL BANK, petitioner, vs. RITRATO GROUP INC.

,
INTERNATIONAL, INC., and DADASAN GENERAL MERCHANDISE, respondent.

RIATTO

FACTS:
Petitioner Philippine National Bank is a domestic corporation organized and existing under Philippine
law. Respondents Ritratto Group, Inc., Riatto International, Inc. and Dadasan General Merchandise are domestic
corporations, likewise, organized and existing under Philippine law.
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 US$1,290,000.00 in November
1996; to US$1,425,000.00 in February 1997; and decreased to US$1,421,316.18 in April 1998. Respondents made
repayments of the loan incurred by remitting those amounts to their loan account with PNB-IFL in 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 30, 1999, the
trial court judge issued an Order for the issuance of a writ of preliminary injunction, which writ was correspondingly
issued on July 14, 1999. On October 4, 1999, the motion to dismiss was denied by the trial court judge for lack of
merit.
Petitioner, thereafter, in a petition for certiorari and prohibition assailed the issuance of the writ of preliminary
injunction before the Court of Appeals. In the impugned decision,[1] the appellate court dismissed the petition.
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]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 trial court, however, in its Order dated October 4, 1994, ruled that since PNB-IFL is a wholly owned
subsidiary of defendant Philippine National Bank, the suit against the defendant PNB is a suit against PNB-IFL.
[10]
In justifying its ruling, the trial court, citing the case of Koppel Phil Inc. vs. Yatco,[11] reasoned that the corporate
entity may be disregarded 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.[12]
ISSUE:
Whether or not the suit against PNB is also a suit against PNB-IFL.

RULING:
The general rule is that as a legal entity, a corporation has a personality distinct and separate from its individual
stockholders or members, and is not affected by the personal rights, obligations and transactions of the latter. [13] 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. The courts may in the exercise of judicial discretion step in to prevent the abuses of
separate entity privilege and pierce the veil of corporate entity.

22. ELCEE
FARMS
INC.
and
CORAZON
vs.
NATIONAL LABOR RELATIONS COMMISSION

SAGUEMULLER, Petitioners,

FACTS:

Pampelo Semillano and one hundred forty-three (143) other complainants, represented by the labor union,
Sugar Agricultural Industrial Labor Organization (SAILO), filed this complaint for illegal dismissal

Private respondents alleged that they were all regular farm workers in Hacienda Trinidad, which was
owned and operated by petitioner corporation Elcee Farms. Complainants alleged that petitioner Corazon
Saguemuller was the president of Elcee Farms, but records disclosed that it was her son, Konrad
Saguemuller, who was the president thereof. 3 Some of the complainants allegedly worked in Hacienda
Trinidad as early as 1960. 4 On 27 April 1987, Elcee Farms entered into a Lease Agreement with Garnele
Aqua Culture Corporation (Garnele).5 Nevertheless, most of the private respondents continued to work in
Hacienda Trinidad. On appeal, they presented payrolls and Social Security System (SSS) Forms E-4 issued
during the period that Garnele leased the hacienda, naming Elcee Farms as their employer.6

On 15 November 1990, Garnele sub-leased Hacienda Trinidad to Daniel Hilado, who operated HILLA. The contract
of lease executed between Garnele and Daniel Hilado stipulated the continued employment of 120 of the formers
employees by the latter, but the contract was silent as to the benefits which may accrue to the employees as a
consequence of their employment with Elcee Farms. 7 Thus, private respondents were allowed to continue working
in Hacienda Trinidad, under the management of HILLA. 8 Soon after HILLA took over, Daniel Hilado entered into a
Collective Bargaining Agreement (CBA) with the United Sugar Farmers Organization (USFO). The CBA contained
a closed shop provision stating that:
Sec. 2 Employees/laborers, who at the time of the execution of this Agreement are not yet members of the UNION
be required by the EMPLOYER to join the UNION within thirty (30) days from the signing of this Agreement, and
remain members in good standing as condition of continued employment. Should these employees/laborers refuse
and fail to join and affiliate with the UNION within such a period of time, said employees/laborers shall be
dismissed by the EMPLOYER upon recommendation by the UNION. 9
Due to their refusal to join the labor union, the private respondents were terminated by HILLA.

On 26 December 1990, SAILO and 144 complainants, including the 131 private respondents herein, filed against
Elcee Farms, Corazon Saguemuller, HILLA and its officers, Ray Hilado and Roberto Montao, a complaint for
illegal dismissal with reinstatement with back wages and separation pay with damages before the Labor Arbiter.
The Labor Arbiter dismissed their claim for damages and denied all claims made against Elcee Farms, Corazon
Saguemuller, Rey Hilado and Roberto Montao.13
Complainants appealed and argued that they had an employer-employee relationship with Elcee Farms before
HILLA took possession of the hacienda in November 1990. They pointed out that Elcee Farms failed to present
proof that they were employed by Garnele to substantiate the existence of a valid lease agreement between Elcee
Farms and Garnele. They also pleaded that the closed shop provision of the CBA between HILLA and USFO cannot
be made to apply to the complainants, who were members of another union.14
In its Resolution, the NLRC also explained that Elcee Farms should have informed its employees of the lease made
in favor of HILLA. Further, Elcee Farms was obligated to pay its workers separation pay and other benefits due
since the lease to HILLA was a virtual termination of the employer-employee relationship. Moreover, there is no
showing that HILLA assumed Elcee Farmss obligation to pay the various benefits due to the workers from their
employment with Elcee Farms. Thus, Elcee Farms and Corazon Saguemueller were held liable to pay the
complainants separation pay equivalent to one-half month pay for each year of service or one month pay for those
who worked for only one year. 18
On the other hand, the NLRC absolved HILLA and its officers from any liability to the workers since the dismissal
of the complainants was due to their failure to join USFO, in accordance with the closed shop clause found in its
CBA with the USFO. The NLRC found that there was no existing labor union at the time HILLA took legal
possession of Hacienda Trinidad. On the other hand, SAILO filed a petition for certification elections only on 26
December 1990, after Daniel Hilado entered into the CBA with USFO.19
Finally, the NLRC significantly modified the Decision rendered by the Labor Arbiter. The earlier Decision rendered
by the Labor Arbiter granted the claims of only 28 out of the 144 complainants. The NLRC ruled that the claim of
131 employees should be granted and that only 14 of the 144 complainants were to be excluded, based on the
testimony of Pampelo Semillano.
Issue:
Whether the private respondents are entitled to the award of separation pay and moral damages.
HELD:
Moral damages are recoverable when the dismissal of an employee is attended by bad faith or fraud or
constitutes an act oppressive to labor, or is done in a manner contrary to good morals, good customs or public policy.
Exemplary damages, on the other hand, are recoverable when the dismissal was done in a wanton, oppressive, or
malevolent manner.22
Bad faith on the part of Elcee Farms is shown by the act of simulating a lease agreement with Garnele in order to
evade paying private respondents the proper amount of separation benefits based on the number of years they
worked in the hacienda, as provided by the Labor Code. Records show that Elcee Farms did not pay any separation
benefits to the private respondents when they allegedly leased the hacienda to Garnele, and again when the hacienda
was leased to Daniel Hilado. When the employees filed their complaint with the Labor Arbiter, Elcee Farms, using

the simulated lease agreement with Garnele, tried to deny liability by claiming that their claims had already
prescribed. It claimed that the lease agreement with Garnele, which was allegedly executed in 1987, effectively
terminated the employer-employee relationship before the complaint was filed in 1990, or more than three years
after. These unlaudable acts undermine the workers statutory rights for which moral damages may be awarded.
In the present case, Elcee Farms effectively ceased to operate and manage Hacienda Trinidad when,
through Garnele, it leased the hacienda to Daniel Hilado. The validity of the aforementioned lease was not
questioned by any of the parties. There is no question that the lease to Daniel Hilado effectively terminated the
employer-employee relationship between Elcee Farms and the farmworkers. Private respondents Pampelo Semillano
and Roel Benignos testified that HILLA took possession of the hacienda in 1990 and managed the same. 24 This was
corroborated by the testimony of Anonio Sidayon, the administrator of HILLA. 25 After the said lease was executed,
the employer-employee relationship between the farm employees and Elcee Farms was severed. The lease
agreement between Garnele and Daniel Hilado identified the employees who will continue working with the new
management and stipulated that workers who were not in the list, whether new or employed in the past, will not be
employed by the lessee.26 The lease contract even specified that Daniel Hilado will only be liable for all future labor
cases, the cause of which arose during or by virtue of the sublease. 27 Clearly, there was a cessation of operations of
Elcee Farms, which renders it liable for separation pay to its employees, under Section 283 of the Labor Code.
This Court, nonetheless, finds merit in the petitioners allegation that Corazon Saguemuller should not be
subsidiarily liable with Elcee Farms for separation pay and damages. It is basic that a corporation is 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. Mere ownership by a single stockholder or by another corporation of all or nearly
all of the capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate
personality.
In the present case, the NLRC took into account the testimony of the witness Roel Benignos who said that they
believed that petitioner Corazon Saguemuller was the president of Elcee Farms because the employees would
approach her if they needed help, as well as the fact that her sons were the officers of Elcee Farms and Garnele.
Beyond these bare suppositions, no evidence, oral or documentary, was presented to prove that Corazon
Saguemuller was truly the President of Elcee Farms. Nor was there even proof that she was in active management of
the corporation and had dictated policies for implementation by the corporation. Extending help to private
respondents certainly did not automatically vest upon her the position of President of the corporation. There,
likewise, appears to be no evidence on record that she had acted maliciously or in bad faith in terminating the
services of the private respondents; nor has it been shown that she has in any way consented to the simulated lease
contract executed by her sons which effectively terminated the services of the private respondents.

23. LUISITO PADILLA and PHOENIX-OMEGA DEVELOPMENT AND MANAGEMENT


CORPORATION, petitioners, vs. THE HONORABLE COURT OF APPEALS and SUSANA
REALTY, INC., respondents.
.
FACTS:
On June 27, 1983, Susana Realty, Inc. (SRI), by a deed of absolute sale, sold to the Light Rail Transit Authority
(LRTA) several parcels of land located in Taft Avenue Extension, San Rafael District, Pasay City. Under paragraph

7 of the deed of sale, SRI reserved to itself the right of first refusal to develop and/or improve the property sold
should the LRTA decide to lease and/or assign to any person the right to develop and/or improve the property.
On November 28, 1986, the LRTA and Phoenix Omega Development and Management Corporation (Phoenix
Omega) entered into a Commercial Stall Concession Contract authorizing the latter to construct and develop
commercial stalls on a 90 sq. m. portion of the property bought from SRI. SRI opposed the agreement as having
violated the deed of sale it entered with LRTA. A tripartite agreement was later concluded by the parties, however,
whereby SRI agreed to honor the terms of the concession contract and to lease to Phoenix Omega its (SRIs)
property (remaining property) adjacent to the 90 sq. m. portion subject of the concession contract.
A contract was thus entered into on July 28, 1988 between Phoenix Omega and SRI with LRTA whereby Phoenix
Omega undertook to construct commercial stalls on the 90-sq. m. property in accordance with plans and
specifications prepared by the latter, the construction to begin, however, only upon SRIs approval of such plans and
specifications. Also on July 28, 1988, Phoenix Omega, by a deed of assignment, assigned its right and interests over
the remaining property unto its sister company, PKA Development and Management Corporation
(PKA). Signatories to the deed of assignment were Eduardo Gatchalian in his capacity as President of Phoenix
Omega, and Luisito B. Padilla (Padilla), one of the petitioners herein, in his capacity as President and General
Manager of PKA. The development of the remaining property having been assigned to PKA, it entered into a
contract of lease with SRI likewise on July 28, 1988.
In the meantime, SRI sold part of its remaining property to a third party. An amended contract of lease was thus
forged in January 1989 among SRI, PKA and Phoenix Omega, whereby the parties agreed to substitute the already
sold portion of SRIs remaining property with 2 parcels of land also belonging to SRI. In this amended contract of
lease, PKA was again represented by Padilla in his capacity as its President and General Manager. And Phoenix
Omega, which was not a party to the July 28, 1988 lease contract sought to be amended but which was a party, to the
amended contract, was also represented by Padilla as Chairman of the Board of Directors of Phoenix Omega.
PKAs building permit was later revoked due to certain violations of the National Building Code (BP 344).
On August 24, 1989, PKA was allowed by the (Department) of Public Works and Highway(s) to resume
construction on the leased premises subject to PKAs correction of the defects in the construction to conform to BP
344.
As SRIs approval of PKAs amended plans in the construction was required, PKA transmitted the same to SRI
which withheld approval thereof pending PKAs correction of the defects in the construction.
Repeated requests for approval of its amended plans not having been heeded by SRI, PKA filed at the court a
quo the action at bar for rescission of contract of lease against SRI, alleging that SRIs refusal to approve the plans
without any justifiable reason deprived it of the use of the commercial stalls, thereby incurring losses.
SRI, upon the other hand, claimed that it was PKA which violated the terms of their contract, alleging that PKA
failed to complete within six months the construction of the commercial stalls during which period it was not paying
any rentals and that PKA undertook the construction without first having its plans approved.
Petitioners stress that the RTC, the CA, and this Court, in the main case (Civil Case No. 7302), did not find
them solidarily liable with PKA, and rightly so since PKA and Phoenix-Omega are two different entities. PhoenixOmegas only participation in the properties subject of the main case was as the construction company that would
develop the properties on behalf of PKA. Phoenix-Omega was involved in the amended lease agreement between

SRI and PKA only to the extent that it had to apply the terms of the tripartite agreement (among LRTA, SRI, and
Phoenix-Omega) to the development of the LRTA-owned property situated in front of the lots leased to PKA by SRI.
[10]
Petitioners argue that the amended lease contract was, in reality, only between SRI and PKA.
Petitioners protest the piercing of the veil of corporate fiction between themselves and PKA.
On the other hand, private respondent argues that there is no error in the issuance of the alias writ of execution
against the properties of petitioners since the trial court, the CA, and this Court had all ruled that petitioners and
PKA are in reality one and the same entity.
RULING:
It is clear that Padilla participated in the proceedings below as general manager of PKA and not in any other
capacity. The fact that at the same time he was the chairman of the board of Phoenix-Omega cannot, by any stretch
of reasoning, equate to participation by Phoenix-Omega in the same proceedings. We again stress that PhoenixOmega was not a party to the case and so could not have taken part therein.
Private respondent, however, insists that the trial court had pierced the veil of corporate fiction protecting
petitioners, and this justifies execution against their properties.
The general rule is that a corporation is clothed with a personality separate and distinct from the persons
composing it. It may not be held liable for the obligations of the persons composing it, and neither can its
stockholders be held liable for its obligations.[17]
This veil of corporate fiction may only be disregarded in cases where the corporate vehicle is being used to
defeat public convenience, justify wrong, protect fraud, or defend crime. [18] PKA and Phoenix-Omega are admittedly
sister companies, and may be sharing personnel and resources, but we find in the present case no allegation, much
less positive proof, that their separate corporate personalities are being used to defeat public convenience, justify
wrong, protect fraud, or defend crime. For the separate juridical personality of a corporation to be disregarded, the
wrongdoing must be clearly and convincingly established. It cannot be presumed.

24. DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. HONORABLE COURT OF


APPEALS and REMINGTON INDUSTRIAL SALES CORPORATION, respondents.
FACTS:
Marinduque Mining Industrial Corporation (Marinduque Mining), a corporation engaged in the manufacture of
pure and refined nickel, nickel and cobalt in mixed sulfides, copper ore/concentrates, cement and pyrite conc.,
obtained from the Philippine National Bank (PNB) various loan accommodations. To secure the loans, Marinduque
Mining executed on October 9, 1978 a Deed of Real Estate Mortgage and Chattel Mortgage in favor of PNB. As of
November 20, 1980, the loans extended by PNB amounted to P4 Billion, exclusive of interest and charges. [1]
On July 13, 1981, Marinduque Mining executed in favor of PNB and the Development Bank of the Philippines
(DBP) a second Mortgage Trust Agreement. In said agreement, Marinduque Mining mortgaged to PNB and DBP
all its real properties located at Surigao del Norte, Sipalay, Negros Occidental, and Antipolo, Rizal, including the
improvements thereon. The mortgage also covered all of Marinduque Minings chattels, as well as assets of

whatever kind, nature and description which Marinduque Mining may subsequently acquire in substitution or
replenishment or in addition to the properties covered by the previous Deed of Real and Chattel Mortgage dated
October 7, 1978. Apparently, Marinduque Mining had also obtained loans totaling P2 Billion from DBP, exclusive
of interest and charges.[2]
On April 27, 1984, Marinduque Mining executed in favor of PNB and DBP an Amendment to Mortgage Trust
Agreement by virtue of which Marinduque Mining mortgaged in favor of PNB and DBP all other real and personal
properties and other real rights subsequently acquired by Marinduque Mining. [3]
For failure of Marinduque Mining to settle its loan obligations, PNB and DBP instituted sometime on July and
August 1984 extrajudicial foreclosure proceedings over the mortgaged properties.
Finally, at the public auction sale conducted on September 18, 1984 on the foreclosed personal properties of MMIC,
the same were sold to PNB and DBP as the highest bidder in the sum of P678,772,000.00
PNB and DBP thereafter thru a Deed of Transfer dated August 31, 1984, purposely, in order to ensure the continued
operation of the Nickel refinery plant and to prevent the deterioration of the assets foreclosed, assigned and
transferred to Nonoc Mining and Industrial Corporation all their rights, interest and participation over the foreclosed
properties of MMIC located at Nonoc Island, Surigao del Norte for an initial consideration of P14,361,000,000.00
Likewise, thru a Deed of Transfer dated June 6, 1984, PNB and DBP assigned and transferred in favor of Maricalum
Mining Corp. all its rights, interest and participation over the foreclosed properties of MMIC at Sipalay, Negros
Occidental for an initial consideration of P325,800,000.00
On February 27, 1987, PNB and DBP, pursuant to Proclamation No. 50 as amended, again assigned, transferred and
conveyed to the National Government thru the Asset Privatization Trust (APT) all its existing rights and interest over
the assets of MMIC, earlier assigned to Nonoc Mining and Industrial Corporation, Maricalum Mining Corporation
and Island Cement Corporation
In the meantime, between July 16, 1982 to October 4, 1983, Marinduque Mining purchased and caused to be
delivered construction materials and other merchandise from Remington Industrial Sales Corporation (Remington)
worth P921,755.95. The purchases remained unpaid as of August 1, 1984 when Remington filed a complaint for a
sum of money and damages against Marinduque Mining for the value of the unpaid construction materials and other
merchandise purchased by Marinduque Mining, as well as interest, attorneys fees and the costs of suit.
On September 7, 1984, Remingtons original complaint was amended to include PNB and DBP as codefendants in view of the foreclosure by the latter of the real and chattel mortgages on the real and personal
properties, chattels, mining claims, machinery, equipment and other assets of Marinduque Mining. [5]
On September 13, 1984, Remington filed a second amended complaint to include as additional defendant, the
Nonoc Mining and Industrial Corporation (Nonoc Mining). Nonoc Mining is the assignee of all real and personal
properties, chattels, machinery, equipment and all other assets of Marinduque Mining at its Nonoc Nickel Factory in
Surigao del Norte.[6]
On March 26, 1986, Remington filed a third amended complaint including the Maricalum Mining Corporation
(Maricalum Mining) and Island Cement Corporation (Island Cement) as co-defendants. Remington asserted that
Marinduque Mining, PNB, DBP, Nonoc Mining, Maricalum Mining and Island Cement must be treated in law as
one and the same entity by disregarding the veil of corporate fiction since:

1. Co-defendants NMIC, Maricalum and Island Cement which are newly created entities are practically owned
wholly by defendants PNB and DBP, and managed by their officers, aside from the fact that the aforesaid codefendants NMIC, Maricalum and Island Cement were organized in such a hurry and in such suspicious
circumstances by co-defendants PNB and DBP after the supposed extra-judicial foreclosure of MMICs assets as to
make their supposed projects assets, machineries and equipment which were originally owned by co-defendant
MMIC beyond the reach of creditors of the latter.
2. The personnel, key officers and rank-and-file workers and employees of co-defendants NMIC, Maricalum and
Island Cement creations of co-defendants PNB and DBP were the personnel of co-defendant MMIC such that x x x
practically there has only been a change of name for all legal purpose and intents.
3. The places of business not to mention the mining claims and project premises of co-defendants NMIC,
Maricalum and Island Cement likewise used to be the places of business, mining claims and project premises of codefendant MMIC as to make the aforesaid co-defendants NMIC, Maricalum and Island Cement mere adjuncts and
subsidiaries of co-defendants PNB and DBP, and subject to their control and management.
On top of everything, co-defendants PNB, DBP NMIC, Maricalum and Island Cement being all corporations created
by the government in the pursuit of business ventures should not be allowed to ignore, or obliterate with impunity
nay illegally, the financial obligations of MMIC whose operations co-defendants PNB and DBP had highly financed
before the alleged extrajudicial foreclosure of defendant MMICs assets, machineries and equipment to the extent
that major policies of co-defendant MMIC were being decided upon by co-defendants PNB and DBP as major
financiers who were represented in its board of directors forming part of the majority thereof which through the
alleged extrajudicial foreclosure culminated in a complete take-over by co-defendants PNB and DBP bringing about
the organization of their co-defendants NMIC, Maricalum and Island Cement to which were transferred all the
assets, machineries and pieces of equipment of co-defendant MMIC used in its nickel mining project in Surigao del
Norte, copper mining operation in Sipalay, Negros Occidental and cement factory in Antipolo, Rizal to the prejudice
of creditors of co-defendant MMIC such as plaintiff Remington Industrial Sales Corporation whose stockholders,
officers and rank-and-file workers in the legitimate pursuit of its business activities, invested considerable time,
sweat and private money to supply, among others, co-defendant MMIC with some of its vital needs for its operation,
which co-defendant MMIC during the time of the transactions material to this case became x x x co-defendants PNB
and DBPs instrumentality, business conduit, alter ego, agency (sic), subsidiary or auxiliary corporation, by virtue of
which it becomes doubly necessary to disregard the corporation fiction that co-defendants PNB, DBP, MMIC,
NMIC, Maricalum and Island Cement, six (6) distinct and separate entities, when in fact and in law, they should be
treated as one and the same at least as far as plaintiffs transactions with co-defendant MMIC are concerned, so as
not to defeat public convenience, justify wrong, subvert justice, protect fraud or confuse legitimate issues involving
creditors such as plaintiff, a fact which all defendants were as (sic) still are aware of during all the time material to
the transactions subject of this case.[7]
On April 3, 1989, Remington filed a motion for leave to file a fourth amended complaint impleading the Asset
Privatization Trust (APT) as co-defendant. Said fourth amended complaint was admitted by the lower court in its
Order dated April 29, 1989.

RTC DECISION:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff, ordering the defendants Marinduque Mining &
Industrial Corporation, Philippine National Bank, Development Bank of the Philippines, Nonoc Mining and

Industrial Corporation, Maricalum Mining Corporation, Island Cement Corporation and Asset Privatization Trust to
pay, jointly and severally, the sum of P920,755.95, representing the principal obligation, including the stipulated
interest as of June 22, 1984, plus ten percent (10%) surcharge per annum by way of penalty, until the amount is fully
paid; the sum equivalent to 10% of the amount due as and for attorneys fees; and to pay the costs.[8]
Upon appeal by PNB, DBP, Nonoc Mining, Maricalum Mining, Island Cement and APT, the Court of Appeals,
in its Decision dated October 6, 1995, affirmed the decision of the RTC. Petitioner filed a Motion for
Reconsideration, which was denied in the Resolution dated August 29, 1996.
Hence, this petition, DBP maintaining that Remington has no cause of action against it or PNB, nor against
their transferees, Nonoc Mining, Island Cement, Maricalum Mining, and the APT.

On the other hand, private respondent Remington submits that the transfer of the properties was made in fraud
of creditors. The presence of fraud, according to Remington, warrants the piercing of the corporate veil such that
Marinduque Mining and its transferees could be considered as one and the same corporation. The transferees,
therefore, are also liable for the value of Marinduque Minings purchases.

HELD:
It is an elementary and 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. However, when the notion
of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard
the corporation as an association of persons or in case of two corporations, merge them into one.
In accordance with the foregoing rule, this Court has disregarded the separate personality of the corporation
where the corporate entity was used to escape liability to third parties. [11] In this case, however, we do not find any
fraud on the part of Marinduque Mining and its transferees to warrant the piercing of the corporate veil.
It bears stressing that PNB and DBP are mandated to foreclose on the mortgage when the past due account had
incurred arrearages of more than 20% of the total outstanding obligation.
PNB and DBP did not only have a right, but the duty under PD 385, to foreclose upon the subject
properties. The banks had no choice but to obey the statutory command.
The court do not see any bad faith on the part of DBP by its creation of Nonoc Mining, Maricalum and Island
Cement. As Remington itself concedes, DBP is not authorized by its charter to engage in the mining business.
[13]
The creation of the three corporations was necessary to manage and operate the assets acquired in the foreclosure
sale lest they deteriorate from non-use and lose their value. In the absence of any entity willing to purchase these
assets from the bank, what else would it do with these properties in the meantime? Sound business practice required
that they be utilized for the purposes for which they were intended.
Remington also asserted in its third amended complaint that the use of Nonoc Mining, Maricalum and Island
Cement of the premises of Marinduque Mining and the hiring of the latters officers and personnel also constitute
badges of bad faith.

Assuming that the premises of Marinduque Mining were not among those acquired by DBP in the foreclosure
sale, convenience and practicality dictated that the corporations so created occupy the premises where these assets
were found instead of relocating them. No doubt, many of these assets are heavy equipment and it may have been
impossible to move them. The same reasons of convenience and practicality, not to mention efficiency, justified the
hiring by Nonoc Mining, Maricalum and Island Cement of Marinduque Minings personnel to manage and operate
the properties and to maintain the continuity of the mining operations.
To reiterate, the doctrine of piercing the veil of corporate fiction applies only when such corporate fiction is
used to defeat public convenience, justify wrong, protect fraud or defend crime. [14] To disregard the separate juridical
personality of a corporation, the wrongdoing must be clearly and convincingly established. It cannot be presumed.
[15]
In this case, the Court finds that Remington failed to discharge its burden of proving bad faith on the part of
Marinduque Mining and its transferees in the mortgage and foreclosure of the subject properties to justify the
piercing of the corporate veil.

25.JARDINE DAVIES, INC.,


Petitioner,
VS.
JRB REALTY, INC.,
Respondent

G.R. No. 151438

FACTS:

Respondent JRB Realty, Inc. built a nine-storey building, named Blanco Center, on its parcel of land
located at 119 Alfaro St., Salcedo Village, Makati City. An air conditioning system was needed for the Blanco Law
Firm housed at the second floor of the building. On March 13, 1980, the respondents Executive Vice-President,
Jose R. Blanco, accepted the contract quotation of Mr. A.G. Morrison, President of Aircon and Refrigeration
Industries, Inc. (Aircon), for two (2) sets of Fedders Adaptomatic 30,000 kcal air conditioning equipment with a
net total selling price of P99,586.00.[2] Thereafter, two (2) brand new packaged air conditioners of 10 tons capacity
each to deliver 30,000 kcal or 120,000 BTUH [3] were installed by Aircon. When the units with rotary compressors
were installed, they could not deliver the desired cooling temperature.
Despite several adjustments and corrective measures, the respondent conceded that Fedders Air
Conditioning USAs technology for rotary compressors for big capacity conditioners like those installed at the
Blanco Center had not yet been perfected.

The parties thereby agreed to replace the units with reciprocating/semi-hermetic compressors instead.
Regrettably, however, it could not specify a date when delivery could be effected.

TempControl Systems, Inc. (a subsidiary of Aircon) undertook the maintenance of the units, inclusive of
parts and services.

In October 1987, the respondent learned, through newspaper ads, [5] that Maxim Industrial and
Merchandising Corporation (Maxim, for short) was the new and exclusive licensee of Fedders Air Conditioning
USA in the Philippines for the manufacture, distribution, sale, installation and maintenance of Fedders air
conditioners. The respondent requested that Maxim honor the obligation of Aircon, but the latter refused.
Considering that the ten-year period of prescription was fast approaching, to expire on March 13, 1990, the
respondent then instituted, on January 29, 1990, an action for specific performance with damages against Aircon &
Refrigeration Industries, Inc., Fedders Air Conditioning USA, Inc., Maxim Industrial & Merchandising Corporation
and petitioner Jardine Davies, Inc. [6] The latter was impleaded as defendant, considering that Aircon was a
subsidiary of the petitioner.

Of the four defendants, only the petitioner filed its Answer.

The trial court ruled that Aircon was a subsidiary of the petitioner, and concluded,
HELD:

It is an elementary and fundamental principle of corporation law that a corporation is an artificial being
invested by law with a personality separate and distinct from its stockholders and from other corporations to which it
may be connected. While a corporation is allowed to exist solely for a lawful purpose, the law will regard it as an
association of persons or in case of two corporations, merge them into one, when this corporate legal entity is used

as a cloak for fraud or illegality.[14] This is the doctrine of piercing the veil of corporate fiction which applies only
when such corporate fiction is used to defeat public convenience, justify wrong, protect fraud or defend crime.
[15]

The rationale behind piercing a corporations identity is to remove the barrier between the corporation from the

persons comprising it to thwart the fraudulent and illegal schemes of those who use the corporate personality as a
shield for undertaking certain proscribed activities.[16]

While it is true that Aircon is a subsidiary of the petitioner, it does not necessarily follow that Aircons
corporate legal existence can just be disregarded. InVelarde v. Lopez, Inc.,[17] the Court categorically held that a
subsidiary has an independent and separate juridical personality, distinct from that of its parent company; hence, any
claim or suit against the latter does not bind the former, and vice versa. In applying the doctrine, the following
requisites must be established: (1) control, not merely majority or complete stock control; (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 acts 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. [18]

The records bear out that Aircon is a subsidiary of the petitioner only because the latter acquired Aircons majority
of capital stock. It, however, does not exercise complete control over Aircon; nowhere can it be gathered that the
petitioner manages the business affairs of Aircon. Indeed, no management agreement exists between the petitioner
and Aircon, and the latter is an entirely different entity from the petitioner.[19]

Jardine Davies, Inc., incorporated as early as June 28, 1946,[20] is primarily a financial and trading company.

The existence of interlocking directors, corporate officers and shareholders, which the respondent court
considered, is not enough justification to pierce the veil of corporate fiction, in the absence of fraud or other public
policy considerations.[24] But even when there is dominance over the affairs of the subsidiary, the doctrine of

piercing the veil of corporate fiction applies only when such fiction is used to defeat public convenience, justify
wrong, protect fraud or defend crime.[25] To warrant resort to this extraordinary remedy, there must be proof that the
corporation is being used as a cloak or cover for fraud or illegality, or to work injustice. [26] Any piercing of the
corporate veil has to be done with caution. [27] The wrongdoing must be clearly and convincingly established. It
cannot just be presumed.[28]
In the instant case, there is no evidence that Aircon was formed or utilized with the intention of defrauding
its creditors or evading its contracts and obligations. There was nothing fraudulent in the acts of Aircon in this case.
Aircon, as a manufacturing firm of air conditioners, complied with its obligation of providing two air conditioning
units for the second floor of the Blanco Center in good faith, pursuant to its contract with the respondent.
Unfortunately, the performance of the air conditioning units did not satisfy the respondent despite several
adjustments and corrective measures. In a Letter[29] dated October 22, 1980, the respondent even conceded that
Fedders Air Conditioning USA has not yet perhaps perfected its technology of rotary compressors, and agreed to
change the compressors with the semi-hermetic type. Thus, Aircon substituted the units with serviceable ones which
delivered the cooling temperature needed for the law office. After enjoying ten (10) years of its cooling power,
respondent cannot now complain about the performance of these units, nor can it demand a replacement thereof.
26. ALERT SECURITY VS. PASAWILAN

FACTS:
Respondents Saidali Pasawilan, Wilfredo Verceles and Melchor Bulusan were all employed by petitioner
Alert Security and Investigation Agency, Inc. (Alert Security) as security guards beginning March 31, 1996, January
14, 1997, and January 24, 1997, respectively. They were paid 165.00 pesos a day as regular employees, and
assigned at the Department of Science and Technology (DOST) pursuant to a security service contract between the
DOST and Alert Security.
Respondents aver that because they were underpaid, they filed a complaint for money claims against Alert
Security and its president and general manager, petitioner Manuel D. Dasig, before Labor Arbiter Ariel C.
Santos. As a result of their complaint, they were relieved from their posts in the DOST and were not given new
assignments despite the lapse of six months. On January 26, 1999, they filed a joint complaint for illegal dismissal
against petitioners.
Petitioners, on the other hand, deny that they dismissed the respondents. They claimed that from the
DOST, respondents were merely detailed at the Metro Rail Transit, Inc. at the Light Rail Transit Authority (LRTA)
Compound in Aurora Blvd. because the wages therein were already adjusted to the latest minimum wage. Petitioners
presented Duty Detail Orders[5] that Alert Security issued to show that respondents were in fact assigned to

LRTA. Respondents, however, failed to report at the LRTA and instead kept loitering at the DOST and tried to
convince other security guards to file complaints against Alert Security. Thus, on August 3, 1998, Alert Security
filed a termination report[6] with the Department of Labor and Employment relative to the termination of the
respondents.
Issues:

1.

whether respondents were illegally dismissed.

2.

WON the president of alert security is solidarily liable with alert security.
Yes. As a rule, employment cannot be terminated by an employer without any just or authorized cause. No

less than the 1987 Constitution in Section 3, Article 13 guarantees security of tenure for workers and because of this,
an employee may only be terminated for just [17] or authorized[18] causes that must comply with the due process
requirements mandated[19] by law.
On the question of the propriety of holding petitioner Manuel D. Dasig, president and general manager of
Alert Security, solidarily liable with Alert Security for the payment of the money awards in favor of respondents, we
find petitioners arguments meritorious.
Basic is the rule that a corporation has a separate and distinct personality apart from its directors, officers,
or owners. In exceptional cases, courts find it proper to breach this corporate personality in order to make directors,
officers, or owners solidarily liable for the companies acts. Section 31, Paragraph 1 of the Corporation
Code[26] provides:
Sec. 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and
knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross
negligence or bad faith in directing the affairs of the corporation or acquire any personal or
pecuniary interest in conflict with their duty as such directors, or trustees shall be liable jointly and
severally for all damages resulting therefrom suffered by the corporation, its stockholders or
members and other persons.
In the present case, there is no evidence to indicate that Manuel D. Dasig, as president and general manager
of Alert Security, is using the veil of corporate fiction to defeat public convenience, justify wrong, protect fraud, or
defend crime. Further, there is no showing that Alert Security has folded up its business or is reneging in its
obligations. In the final analysis, it is Alert Security that respondents are after and it is also Alert Security who
should take responsibility for their illegal dismissal.

27. SARONA VS. NLRC

On June 20, 2003, the petitioner, who was hired by Sceptre as a security guard sometime in April 1976, was
asked by Karen Therese Tan (Karen), Sceptres Operation Manager, to submit a resignation letter as the same was
supposedly required for applying for a position at Royale. The petitioner was also asked to fill up Royales
employment application form, which was handed to him by Royales General Manager, respondent Cesar Antonio
Tan II (Cesar).3
After several weeks of being in floating status, Royales Security Officer, Martin Gono (Martin), assigned
the petitioner at Highlight Metal Craft, Inc. (Highlight Metal) from July 29, 2003 to August 8, 2003. Thereafter, the
petitioner was transferred and assigned to Wide Wide World Express, Inc. (WWWE, Inc.). During his assignment at
Highlight Metal, the petitioner used the patches and agency cloths of Sceptre and it was only when he was posted at
WWWE, Inc. that he started using those of Royale.
On September 17, 2003, the petitioner was informed that his assignment at WWWE, Inc. had been
withdrawn because Royale had allegedly been replaced by another security agency. The petitioner, however, shortly
discovered thereafter that Royale was never replaced as WWWE, Inc.s security agency. When he placed a call at
WWWE, Inc., he learned that his fellow security guard was not relieved from his post.5
On September 21, 2003, the petitioner was once again assigned at Highlight Metal, albeit for a short period
from September 22, 2003 to September 30, 2003. Subsequently, when the petitioner reported at Royales office on
October 1, 2003, Martin informed him that he would no longer be given any assignment per the instructions of Aida
Sabalones-Tan (Aida), general manager of Sceptre. This prompted him to file a complaint for illegal dismissal on
October 4, 2003.6
Labor Arbiter Ruling:
Labor Arbiter Jose Gutierrez (LA Gutierrez) ruled in the petitioners favor and found him illegally
dismissed.
Labor Arbiter Gutierrez refused to pierce Royales corporate veil for purposes of factoring the petitioners
length of service with Sceptre in the computation of his separation pay. LA Gutierrez ruled that Royales corporate
personality, which is separate and distinct from that of Sceptre, a sole proprietorship owned by the late Roso
Sabalones (Roso) and later, Aida, cannot be pierced absent clear and convincing evidence that Sceptre and Royale

share the same stockholders and incorporators and that Sceptre has complete control and dominion over the finances
and business affairs of Royale.
It should be pointed out at this juncture that SCEPTRE, is a single proprietorship. Being so, it has
no distinct and separate personality. It is owned by the late Roso T. Sabalones. After the death of
the owner, the property is supposed to be divided by the heirs and any claim against the sole
proprietorship is a claim against Roso T. Sabalones. After his death, the claims should be instituted
against the estate of Roso T. Sabalones. In short, the estate of the late Roso T. Sabalones should
have been impleaded as respondent of this case.

HELD
A corporation is an artificial being created by operation of law. It possesses the right of succession and such powers,
attributes, and properties expressly authorized by law or incident to its existence. It has a personality separate and
distinct from the persons composing it, as well as from any other legal entity to which it may be related. This is
basic.45
Equally well-settled is the principle that the corporate mask may be removed or the corporate veil pierced
when the corporation is just an alter ego of a person or of another corporation. For reasons of public policy and in
the interest of justice, the corporate veil will justifiably be impaled only when it becomes a shield for fraud, illegality
or inequity committed against third persons.46
Hence, any application of the doctrine of piercing the corporate veil should be done with caution. A court
should be mindful of the milieu where it is to be applied. It must be certain that the corporate fiction was misused to
such an extent that injustice, fraud, or crime was committed against another, in disregard of rights. The wrongdoing
must be clearly and convincingly established; it cannot be presumed. Otherwise, an injustice that was never
unintended may result from an erroneous application.47
Whether the separate personality of the corporation should be pierced hinges on obtaining facts
appropriately pleaded or proved. However, any piercing of the corporate veil has to be done with caution, albeit the
Court will not hesitate to disregard the corporate veil when it is misused or when necessary in the interest of justice.
After all, the concept of corporate entity was not meant to promote unfair objectives.48
The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: 1) defeat of public
convenience as when the corporate fiction is used as a vehicle for the evasion of an existing obligation; 2) fraud
cases or when the corporate entity is used to justify a wrong, protect fraud, or defend a crime; or 3) alter ego cases,
where a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or where the

corporation

is

so

organized

and

controlled

and

its

affairs

are

so

conducted

as

to make it merely an instrumentality, agency, conduit or adjunct of another corporation.49


As correctly pointed out by the petitioner, it was Aida who exercised control and supervision over the
affairs of both Sceptre and Royale. Contrary to the submissions of the respondents that Roso had been the only one
in sole control of Sceptres finances and business affairs, Aida took over as early as 1999 when Roso assigned his
license to operate Sceptre on May 3, 1999. 50 As further proof of Aidas acquisition of the rights as Sceptres sole
proprietor, she caused the registration of the business name Sceptre Security & Detective Agency under her name
with the DTI a few months after Roso abdicated his rights to Sceptre in her favor.51 As far as Royale is concerned,
the respondents do not deny that she has a hand in its management and operation and possesses control and
supervision of its employees, including the petitioner. As the petitioner correctly pointed out, that Aida was the one
who decided to stop giving any assignments to the petitioner and summarily dismiss him is an eloquent testament of
the power she wields insofar as Royales affairs are concerned. The presence of actual common control coupled with
the misuse of the corporate form to perpetrate oppressive or manipulative conduct or evade performance of legal
obligations is patent; Royale cannot hide behind its corporate fiction.
Aidas control over Sceptre and Royale does not, by itself, call for a disregard of the corporate fiction.
There must be a showing that a fraudulent intent or illegal purpose is behind the exercise of such control to warrant
the piercing of the corporate veil.52 However, the manner by which the petitioner was made to resign from Sceptre
and how he became an employee of Royale suggest the perverted use of the legal fiction of the separate corporate
personality. It is undisputed that the petitioner tendered his resignation and that he applied at Royale at the instance
of Karen and Cesar and on the impression they created that these were necessary for his continued employment.
They orchestrated the petitioners resignation from Sceptre and subsequent employment at Royale, taking advantage
of their ascendancy over the petitioner and the latters lack of knowledge of his rights and the consequences of his
actions. Furthermore, that the petitioner was made to resign from Sceptre and apply with Royale only to be
unceremoniously terminated shortly thereafter leads to the ineluctable conclusion that there was intent to violate the
petitioners rights as an employee, particularly his right to security of tenure. The respondents scheme reeks of bad
faith and fraud and compassionate justice dictates that Royale and Sceptre be merged as a single entity, compelling
Royale to credit and recognize the petitioners length of service with Sceptre.
The respondents do not likewise deny that Royale and Sceptre share the same officers and employees.
Karen assumed the dual role of Sceptres Operation Manager and incorporator of Royale. With respect to the
petitioner, even if he has already resigned from Sceptre and has been employed by Royale, he was still using the
patches and agency cloths of Sceptre during his assignment at Highlight Metal.

28.

GOLDEN TOURS VS. HEIRS OF MARIA CONCEPTION LACS


FACTS:
On August 2, 1993, Ma. Concepcion Lacsa (Concepcion) and her sister, Miriam Lacsa (Miriam), boarded a
Goldline passenger bus owned and operated by Travel &Tours Advisers, Inc. They were enroute from Sorsogon to
Cubao, Quezon City.[6] At the time, Concepcion, having just obtained her degree of Bachelor of Science in Nursing
at the Ago Medical and Educational Center, was proceeding to Manila to take the nursing licensure board
examination.[7]Upon reaching the highway at Barangay San Agustin in Pili, Camarines Sur, the Goldline bus, driven
by Rene Abania (Abania), collided with a passenger jeepney coming from the opposite direction and driven by
Alejandro Belbis.[8] As a result, a metal part of the jeepney was detached and struck Concepcion in the chest, causing
her instant death.[9]
On August 23, 1993, Concepcions heirs, represented by Teodoro Lacsa, instituted in the RTC a suit against
Travel & Tours Advisers Inc. and Abania to recover damages arising from breach of contract of carriage, alleged that
the collision was due to the reckless and imprudent manner by which Abania had driven the Goldline bus.[11]
In support of the complaint, Miriam testified that Abania had been occasionally looking up at the video
monitor installed in the front portion of the Goldline bus despite driving his bus at a fast speed; [12] that in Barangay
San Agustin, the Goldline bus had collided with a service jeepney coming from the opposite direction while in the
process of overtaking another bus;[13] that the impact had caused the angle bar of the jeepney to detach and to go
through the windshield of the bus directly into the chest of Concepcion who had then been seated behind the drivers
seat;[14] that concerned bystanders had hailed another bus to rush Concepcion to the Ago Foundation Hospital in
Naga City because the Goldline bus employees and her co-passengers had ignored Miriams cries for help; [15] and
that Concepcion was pronounced dead upon arrival at the hospital.[16]
To refute the plaintiffs allegations, the defendants presented SPO1 Pedro Corporal of the Philippine National
Police Station in Pili, Camarines Sur, and William Cheng, the operator of the Goldline bus. [17] SPO1 Corporal opined
that based on his investigation report, the driver of the jeepney had been at fault for failing to observe precautionary
measures to avoid the collision;[18] and suggested that criminal and civil charges should be brought against the
operator and driver of the jeepney.[19] On his part, Cheng attested that he had exercised the required diligence in the
selection and supervision of his employees;
Thereafter, the plaintiffs moved for the issuance of a writ of execution to implement the decision dated June
30, 1997.[30] The RTC granted their motion on January 31, 2000, [31] and issued the writ of execution on February 24,
2000.[32]

On May 10, 2000, the sheriff implementing the writ of execution rendered a Sheriffs Partial Return,
[33]

certifying that the writ of execution had been personally served and a copy of it had been duly tendered to Travel

& Tours Advisers, Inc. or William Cheng, through his secretary, Grace Miranda, and that Cheng had failed to settle
the judgment amount despite promising to do so. Accordingly, a tourist bus bearing Plate No. NWW-883 was levied
pursuant to the writ of execution.

The main contention of Third Party Claimant is that it is the owner of the Bus and therefore,
it should not be seized by the sheriff because the same does not belong to the defendant Travel &
Tours Advises, Inc. (GOLDLINE) as the third party claimant and defendant are two separate
corporation with separate juridical personalities. Upon the other hand, this Court had scrutinized
the documents submitted by the Third party Claimant and found out that William Ching who
claimed to be the operator of the Travel & Tours Advisers, Inc. (GOLDLINE) is also the
President/Manager and incorporator of the Third Party Claimant Goldline Tours Inc. and he is
joined by his co-incorporators who are Ching and Dy thereby this Court could only say that
these two corporations are one and the same corporations. This is of judicial knowledge that since
Travel & Tours Advisers, Inc. came to Sorsogon it has been known as GOLDLINE.
HELD:
This Court is not persuaded by the proposition of the third party claimant that a corporation has an
existence separate and/or distinct from its members insofar as this case at bar is concerned, for the reason
that whenever necessary for the interest of the public or for the protection of enforcement of their rights,
the notion of legal entity should not and is not to be used to defeat public convenience, justify wrong,
protect fraud or defend crime.

As we see it, the RTC had sufficient factual basis to find that petitioner and Travel and Tours Advisers, Inc. were one
and the same entity, specifically: (a) documents submitted by petitioner in the RTC showing that William Cheng,
who claimed to be the operator of Travel and Tours Advisers, Inc., was also the President/Manager and an
incorporator of the petitioner; and (b) Travel and Tours Advisers, Inc. had been known in Sorsogon as
Goldline. Moreover, the name Goldline was added to defendants name in the Complaint. There was no objection
from William Ching who could have raised the defense that Gold Line Tours, Inc. was in no way liable or
involved. Indeed it appears to this Court that rather than Travel & Tours Advisers, Inc. it is Gold Line Tours, Inc.,
which should have been named party defendant. Be that as it may, We concur in the trial courts finding that the two
companies are actually one and the same, hence the levy of the bus in question was proper.[51]

29.
PALACIO VS. FELY TRANSPORTATION COMPANY
FACTS:

December, 1952, the defendant company hired Alfredo Carillo as driver of AC-787 (687) (a registration for
1952) owned and operated by the said defendant company;
that on December 24, 1952, at about 11:30 a.m., while the driver Alfonso (Alfredo) Carillo was driving AC687 at Halcon Street, Quezon City, wilfully, unlawfully and feloniously and in a negligent, reckless and imprudent
manner, run over a child Mario Palacio of the herein plaintiff Gregorio Palacio;
that on account of the aforesaid injuries, Mario Palacio suffered a simple fracture of the right tenor, complete
third, thereby hospitalizing him at the Philippine Orthopedic Hospital from December 24, 1952, up to January 8, 1953,
and continued to be treated for a period of five months thereafter; that the plaintiff Gregorio Palacio herein is a welder
by occupation and owner of a small welding shop and because of the injuries of his child he has abandoned his shop
where he derives income of P10.00 a day for the support of his big family; that during the period that the plaintiff's
(Gregorio Palacio's) child was in the hospital and who said child was under treatment for five months in order to meet
the needs of his big family, he was forced to sell one air compressor (heavy duty) and one heavy duty electric drill, for
a sacrifice sale of P150.00 which could easily sell at P350.00; that as a consequence of the negligent and reckless act
of the driver Alfredo Carillo of the herein defendant company, the herein plaintiffs were forced to litigate this case

Plaintiffs contend that the defendant corporate should be made subsidiarily liable for damages in the criminal case
because the sale to it of the jeep in question, after the conviction of Alfred Carillo in Criminal Case No. Q-1084 of the
Court of First Instance of Quezon City was merely an attempt on the part of Isabelo Calingasan its president and
general manager, to evade his subsidiary civil liability.
HELD:
The Court agrees with this contention of the plaintiffs. Isabelo Calingasan and defendant Fely Transportation may be
regarded as one and the same person. It is evident that Isabelo Calingasan's main purpose in forming the corporation
was to evade his subsidiary civil liability1 resulting from the conviction of his driver, Alfredo Carillo. This conclusion
is borne out by the fact that the incorporators of the Fely Transportation are Isabelo Calingasan, his wife, his son, Dr.
Calingasan, and his two daughters. We believe that this is one case where the defendant corporation should not be
heard to say that it has a personality separate and distinct from its members when to allow it to do so would be to
sanction the use of the fiction of corporate entity as a shield to further an end subversive of justice.

30.
MARTINEZ VS. MAR FISHING
FACTS:
On 28 June 2001, respondent Mar Fishing Co., Inc. (Mar Fishing), engaged in the business of fishing and
canning of tuna, sold its principal assets to co-respondent Miramar Fishing Co., Inc. (Miramar) through public
bidding.[1] The proceeds of the sale were paid to the Trade and Investment Corporation of the Philippines
(TIDCORP) to cover Mar Fishings outstanding obligation in the amount of 897,560,041.26. [2] In view of that
transfer, Mar Fishing issued a Memorandum dated 23 October 2001 informing all its workers that the company

would cease to operate by the end of the month. [3] On 29 October 2001 or merely two days prior to the months end,
it notified the Department of Labor and Employment (DOLE) of the closure of its business operations. [4]
Thereafter, Mar Fishings labor union, Mar Fishing Workers Union NFL and Miramar entered into a
Memorandum of Agreement.[5] The Agreement provided that the acquiring company, Miramar, shall absorb Mar
Fishings regular rank and file employees whose performance was satisfactory, without loss of seniority rights and
privileges previously enjoyed.[6]
Unfortunately, petitioners, who worked as rank and file employees, were not hired or given separation pay
by Miramar.[7] Thus, petitioners filed Complaints for illegal dismissal with money claims before the Arbitration
Branch of the National Labor Relations Commission (NLRC).
In its 30 July 2002 Decision, the Labor Arbiter (LA) found that Mar Fishing had necessarily closed its
operations, considering that Miramar had already bought the tuna canning plant. [8] By reason of the closure,
petitioners were legally dismissed for authorized cause. [9] In addition, even if Mar Fishing reneged on notifying the
DOLE within 30 days prior to its closure, that failure did not make the dismissals void. Consequently, the LA
ordered Mar Fishing to give separation pay to its workers.[10]

Aggrieved, petitioners pursued the action before the NLRC, which modified the LAs Decision. Noting that
Mar Fishing notified the DOLE only two days before the business closed, the labor court considered petitioners
dismissal as ineffectual.[12]
Additionally, the NLRC pierced the veil of corporate fiction and ruled that Mar Fishing and Miramar were
one and the same entity, since their officers were the same. [14] Hence, both companies were ordered to solidarily pay
the monetary claims.[15]
HELD:
Neither can the veil of corporate fiction between the two companies be pierced by the rest of petitioners
submissions, namely, the alleged take-over by Miramar of Mar Fishings operations and the evident similarity of
their businesses. At this point, it bears emphasizing that since piercing the veil of corporate fiction is frowned upon,
those who seek to pierce the veil must clearly establish that the separate and distinct personalities of the corporations
are set up to justify a wrong, protect a fraud, or perpetrate a deception.[38]