Concept Builders, Inc. v.

NLRC
G.R. No. 108734, May 29,1996
Facts: Concept Builders, Inc., (CBI) a domestic corporation, is engaged in the
construction business while Norberto Marabe, and 21 others 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. 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. 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. On 1 February 1989, an Alias Writ of Execution was issued by the
Labor Arbiter directing the sheriff to collect from CBI the balance of the judgment award,
and to reinstate Marabe, et. al. to their former positions. 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. Was the NLRC correct in issuing the break-open order to levy the HPPI
properties located at CBI and/or HPPIs premises?
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: (1)
Stock ownership by one or common ownership of both corporations; (2) Identity of
directors and officers; (3) The manner of keeping corporate books and records; and (4)
Methods of conducting the business. 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 (1) 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; (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 plaintiff's 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 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. Casio 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.

Halley v. Printwell
G.R. No. 157549, May 30, 2011
Facts: The petitioner was an incorporator and original director of Business Media
Philippines, Inc. (BMPI), which, at its incorporation on November 12, 1987, had an
authorized capital stock of P3,000,000.00 divided into 300,000 shares each with a par
value of P10.00 of which 75,000 were initially subscribed. Printwell engaged in
commercial and industrial printing. BMPI commissioned Printwell for the printing of the
magazine Philippines, Inc. (together with wrappers and subscription cards) that BMPI
published and sold. For that purpose, Printwell extended 30-day credit accommodations
to BMPI. In the period from October 11, 1988 until July 12, 1989, BMPI placed with
Printwell several orders on credit, evidenced by invoices and delivery receipts totaling
P316,342.76. Considering that BMPI paid only P25,000.00, Printwell sued BMPI on
January 26, 1990 for the collection of the unpaid balance of P291,342.76 in the RTC. On
February 8, 1990, Printwell amended the complaint in order to implead as defendants all
the original stockholders and incorporators to recover on their unpaid subscriptions. May
the corporate personality of a corporation be disregarded in the given case?
Held: Yes. Although a corporation has a personality separate and distinct from those of its
stockholders, directors, or officers, such separate and distinct personality is merely a
fiction created by law for the sake of convenience and to promote the ends of justice. The
corporate personality may be disregarded, and the individuals composing the corporation
will be treated as individuals, if the corporate entity is being used as a cloak or cover for
fraud or illegality, as a justification for a wrong, as an alter ego, an adjunct, or a business
conduit for the sole benefit of the stockholders. As a general rule, a corporation is looked
upon as a legal entity, unless and until sufficient reason to the contrary appears. Thus, the
courts always presume good faith, and for that reason accord prime importance to the
separate personality of the corporation, disregarding the corporate personality only after
the wrongdoing is first clearly and convincingly established. It thus behooves the courts
to be careful in assessing the milieu where the piercing of the corporate veil shall be
done. Although nowhere in Printwells amended complaint or in the testimonies Printwell
offered can it be read or inferred from that the petitioner was instrumental in persuading
BMPI to renege on its obligation to pay; or that she induced Printwell to extend the credit
accommodation by misrepresenting the solvency of BMPI to Printwell, her personal
liability, together with that of her co-defendants, remained because the CA found her and
the other defendant stockholders to be in charge of the operations of BMPI at the time the
unpaid obligation was transacted and incurred. It follows, therefore, that whether or not
the petitioner persuaded BMPI to renege on its obligations to pay, and whether or not she
induced Printwell to transact with BMPI were not good defenses in the suit.

Siain Enterprises v. Cupertino Realty Corp.

G.R. No. 170782, June 22, 2009
Facts: Petitioner, Siain Enterprises, Inc. obtained a loan of P37,000,000.00 from
respondent Cupertino Realty Corporation (Cupertino) covered by a promissory note
signed by both petitioners and Cupertinos respective presidents, Cua Le Leng and
Wilfredo Lua. Two (2) days thereafter, the parties executed an amendment to the
promissory note which provided for a 17% interest per annum on the P37,000,000.00
loan. It was likewise signed by Cua Le Leng and Wilfredo Lua on behalf of petitioner and
Cupertino, respectively. On August 16, 1995, Cua Le Leng signed a second promissory
note in favor of Cupertino for P160,000,000.00. Cua Le Leng signed the second
promissory note as maker, on behalf of petitioner, and as co-maker, liable to Cupertino in
her personal capacity. However, peitioner, wrote Cupertino and demanded the release of
the P160,000,000.00 loan increase covered by the amendment of real estate mortgage. In
the demand letter, petitioners counsel stated that despite repeated verbal demands,
Cupertino had yet to release the P160,000,000.00 loan. In complete refutation, Cupertino,
likewise through counsel, responded and denied that it had yet to release the
P160,000,000.00 loan. Cupertino maintained that petitioner had long obtained the
proceeds of the aforesaid loan. Cupertino declared petitioners demand as made to
abscond from a just and valid obligation, a mere afterthought, following Cupertinos
letter demanding payment of the P37,000,000.00 loan covered by the first promissory
note which became overdue on March 5, 1996. Not surprisingly, Cupertino instituted
extrajudicial foreclosure proceedings over the properties subject of the amended real
estate mortgage. After trial, the RTC rendered a decision dismissing petitioners
complaint. On appeal, the CA affirmed the ruling of the RTC. In dismissing petitioners
complaint and finding for Cupertino, both the lower courts upheld the validity of the
amended real estate mortgage. The RTC and the CA gave credence to Cupertinos
evidence that the P160,000,000.00 proceeds were the total amount received by petitioner
and its affiliate companies over the years from Wilfredo Lua, Cupertinos president. In
this regard, the lower courts applied the doctrine of piercing the veil of corporate fiction
to preclude petitioner from disavowing receipt of the P160,000,000.00 and paying its
obligation under the amended real estate mortgage. Were the lower courts correct in
applying the said doctrine?
Held: Yes. As a general rule, a corporation will be deemed a separate legal entity until
sufficient reason to the contrary appears. But the rule is not absolute. A corporations
separate and distinct legal personality may be disregarded and the veil of corporate
fiction pierced when the notion of legal entity is used to defeat public convenience,
justify wrong, protect fraud, or defend crime. In this case, Cupertino presented
overwhelming evidence that petitioner and its affiliate corporations had received the
proceeds of the P160,000,000.00 loan increase which was then made the consideration
for the Amended Real Estate Mortgage. Firstly. As can be viewed from the extant record
of the instant case, Cua Leleng is the majority stockholder of the three (3) corporations
namely, Yuyek Manufacturing Corporation, Siain Transport, Inc., and Siain Enterprises
Inc., at the same time the President thereof. Second. Being the majority stockholder and
the president, Cua Le leng has the unlimited power, control and authority without the

approval from the board of directors to obtain for and in behalf of the [petitioner]
corporation from [Cupertino] thereby mortgaging her jewelries, the condominiums of her
common law husband, Alberto Lim, the trucks registered in the name of [petitioner]
corporations sister company, Siain Transport Inc., the subject lots registered in the name
of [petitioner] corporation and her oil mill property at Iloilo City. And, to apply the
proceeds thereof in whatever way she wants, to the prejudice of the public. As such,
petitioner corporation is now estopped from denying the above apparent authorities of
Cua Le Leng who holds herself to the public as possessing the power to do those acts,
against any person who dealt in good faith as in the case of Cupertino.