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Karl Anthony T.

corporate veil

Piercing the

G.R. No. 170782 June 22, 2009


SIAIN executed 2 PNs and REMs in favor of respondent (Cupertino). All were
signed by their respective presidents Cua Le Leng for Siain and Wilfredo Lua
for Cupertino. The first set of PN and REM were dated April 10, 1995 wherein
the PN authorizes Cupertino to place in escrow loan proceeds of P37million
with MBTC to pay off petitioners obligation to DBP. This was secured by the
REM. 2 days later the PN was amended to include the interest of 17% p.a.
The second set of PN and REM (amended from the first REM) was dated Aug.
16, 1995 for the amount of P160million, on this second PN the Cua Le Leng
signed as a co-maker. The amended REM reflected the updated total
obligation of P197million of Siain to Cupertino. However, on Mar. 11, 1996
petitioner demanded from Cupertino the release of the loan proceeds of
P160million. Cupertino denied this and maintained that the proceeds had
long been obtained by petitioner. Cupertino instituted an extra judicial
foreclosure over the properties subject of the amended REM; auction sale
was scheduled on Oct. 11, 1996 with respondent Notary Public Edwin
Catacutan. Petitioner filed a complaint with TRO to enjoin Notary Public
Edwin Catacutan from proceeding with the public auction. RTC initially
declared the auction sale as null and void. Subsequently after Cupertino filed
its answer the RTC recalled and set aside the order of declaring the auction
sale as null and void and ruled in favor of the respondent; which was
affirmed by the CA. Records show that various debit memos, checks, pledges
of jewelries, condominium units, trucks and other components were issued to
petitioner and its affiliate corporations as well to its president Cua Le Leng
and her common law spouse Alberto Lim by respondent and its president
Wilfredo Lua and his wife Vicky Lua. Thus the lower courts applied the
doctrine of piercing the veil of the corporate entity in ruling in favor of the
WON the RTC and CA erred in applying the doctrine of piercing the veil
of corporate entity

While it is true that the stockholders have a distinct and separate
personality as to that of the corporation; this is not an absolute rule. The
distinct personality of the corporation may be disregarded and the veil of
corporate fiction pierced when the notion of legal entity is used to defeat
public convience, justify wrong, protect fraud, or defend crime.
Cupertino presented overwhelming evidence that petitioner and its
affiliate corporations had received the proceeds of the P160million loan.
Checks, debit memos, pledges of jewelries, condo units and trucks
were constituted not exclusively in the name Siain but also either in the
name of Yuyek Manufacturing Corporation, Siain Transport Inc., Cua Le Leng
and Alberto Lim is of no moment. The fact remains that these companies are
alter ego of its president Cua Le Leng, it is established in the court that:

Siain and Yuyek have a common set of incorporators

Have the same internal bookkeeper and accountant
Same office address
Same majority stockholder and president (in the person of Cua Le
In Siain Transport, Cua Le Leng has the unlimited authority by and on
herself, without authority from the Board of Directors, to use the fund
In the case of Alberto Lim as Cua Le Lengs common law spouse all the
debit memos and check issued in his name were was actually for the
account of Cua Le Leng.

If the general rule of the corporation has a distinct and separate

personality from its stockholders were applied to this case it will result to
injustice and evasion of a valid obligation. The obligation incurred and/or the
transactions entered into either by Yuyek, or by Siain Trucking, or by Cua Le
Leng or by Alberto Lim with Cupertino are deemed to be that of the
petitioner itself.
The same principle applies to Cupertino, while it can be seen that the debit
memos and checks were issued on the same date as the incorporation of
Cupertino. It does not affect the validity of the subject transactions entered
into by Cupertino Realty Corporation, it being a mere alter ego of its
president Wilfredo Lua, are deemed to be the latters personal transaction
and vice versa.
WHEREFORE, premises considered, the petition is DENIED. The Decision of
the Court of Appeals in CA-G.R. CV No. 71424 is AFFIRMED. Costs against
the petitioner.