CHINA BANKING CORPORATION Vs.

DYNE-SEM ELECTRONICS CORPORATION

FACTS OF THE CASE

Dynetics and Elpidio Ong (solidarily liable) obtained a P8,939,000 loan from petitioner China
Banking Corporation as evidenced by promissory notes. The borrowers failed to pay the obliga
tion. Dynetics has closed its operations and left Ong as the sole responsible for the loan. Petit
ioner bank impleaded respondent Dyne-Sem Electronic Corporation as according to petitioner b
ank, Dyne-sem is an alter ego of Dynetics. The bases of the petitioner are as follows: 1) Dyn
etics and Dyne-Sem are both engaged in the business of integrated circuits and semi conducto
r devices; 2) The factory of Dynetics was used by Dyne-sem as its main office, 3) Dyne-Sem
acquired machineries from Dynetics, 4) Dyne-Sem retained some of the officers of Dynetics.
RTC ruled in favor of respondent to which Court of Appeals affirmed; hence, this petition

ISSUE WON Dyne-Sem is an alter-ego of Dynetics that would allow the court to pierce the former
’s corporate veil.

RULING Dyne-sem is not an alter-ego of Dynetics, and therefore, cannot be held liable for th
e loan obtained by Dynetics. Petitioner failed to prove that Dyne-Sem was organized and cont
rolled, and its affairs conducted, in a manner that made it merely an instrumentality, agency, c
onduit or adjunct of Dynetics, or that it was established to defraud Dynetics’ creditors, includi
ng petitioner. The similarity of business of the two corporations did not warrant a conclusion
that respondent was but a conduit of Dynetics. The acquisition of assets of Dyne-Sem was thr
ough a public bidding. What took place was a sale of the assets of the former to the latter.
Merger is legally distinct from a sale of assets. Thus, where one corporation sells or otherwise
transfers all its assets to another corporation for value, the latter is not, by that fact alone, li
able for the debts and liabilities of the transferor. Even the overlapping of incorporators and st
ockholders of two or more corporations will not necessarily lead to such inference and justify
the piercing of the veil of corporate fiction.

YUTIVO v. Court of Tax Appeals,

FACTS: YUTIVO, a domestic corporation incorporated in 1916 under Philippine laws, was e
ngaged in the importation and sale of hardware supplies and equipment. After the first world
war, it resumed its business and bought a number of cars and trucks from General Motors(GM
), an American Corporation licensed to do business in the Philippines. On June 13, 1946, the
Southern Motors Inc,(SM) was organized to engage in the business of selling cars, trucks and
spare parts. One of the subscribers of stocks during its incorporation was Yu Khe Thai, Yu
Khe Siong and Hu Kho Jin, who are sons of Yu Tiong Yee, one of Yutivo‘s founders. After
SM‘s incorporation and until the withdrawal of GM from the Philippines, the cars and trucks
purchased by Yutivo from GM were sold by Yutivo to SM which the latter sold to the publi
c. Yutivo was appointed importer for Visayas and Mindanao by the US manufacturer of cars
and trucks sold by GM. Yutivo paid the sales tax prescribed on the basis of selling price to
SM. SM paid no sales tax on its sales to the public.

An assessment was made upon Yutivo for deficiency sales tax. The Collector of Internal Rev
enue, contends that the taxable sales were the retail sales by SM to the public and not the sa
les at wholesale made by Yutivo to the latter inasmuch as SM and Yutivo were one and the
same corporation, the former being a subsidiary of the latter. The assessment was disputed by
petitioner. After reinvestigation, a second assessment was made, sustaining the validity of the
first assessment. Yutivo contested the second assessment, alleging that there is no valid ground
to disregard the corporate personality of SM and to hold that it is an adjunct of petitioner.

ISSUE: Whether or not the corporate personality of SM could be disregarded.

 RULING: Yes. A corporation is an entity separate and distinct from its stockholders and fro
m 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 w
ill regard the corporation as an association of persons, or, in the case of two corporations, me
rge them into one. When the corporation is a mere alter ego or business conduit of a person, i
t may be disregarded.

SC ruled that CTA was not justified in finding that SM was organized to defraud the Gover
nment. SM was organized in June 1946, from that date until June 30, 1947, GM was the imp
orter of the cars and trucks sold to Yutivo, which in turn was sold to SM. GM, as importer
was the one solely liable for sales taxes. Neither Yutivo nor SM was subject to the sales taxe
s. Yutivo‘s liability arose only until July 1, 1947 when it became the importer. Hence, there wa
s no tax to evade.

However, SC agreed with the respondent court that SM was actually owned and controlled by
petitioner. Consideration of various circumstances indicate that Yutivo treated SM merely as its
department or adjunct:
a. The founders of the corporation are closely related to each other by blood and affinity.
b. The object and purpose of the business is the same; both are engaged in sale of vehicles,
spare parts, hardware supplies and equipment.
c. The accounting system maintained by Yutivo shows that it maintained high degree of contr
ol over SM accounts.
d. Several correspondences have reference to Yutivo as the head office of SM. SM may eve
n freely use forms or stationery of Yutivo.
e. All cash collections of SM‘s branches are remitted directly to Yutivo.
f. The controlling majority of the Board of Directors of Yutivo is also the controlling majori
ty of SM.
g. The principal officers of both corporations are identical. Both corporations have a common
comptroller in the person of Simeon Sy, who is a brother-in-law of Yutivo‘s president, Yu Khe
Thai.
h. Yutivo, financed principally the business of SM and actually extended all the credit to the
latter not only in the form of starting capital but also in the form of credits extended for the
cars and vehicles allegedly sold by Yutivo to SM.

LIM VS. COURT OF APPEALS

FACTS OF THE CASE

Private respondents Auto Truck Corporation, Alliance Marketing Corporation, Speed Di
stributing, Inc., Active Distributing, Inc. and Action Company are corporations formed,
organized and existing under Philippine laws and which owned real properties covered
under the Torrens system.

On 11 June 1994, Pastor Y. Lim died intestate. Herein petitioner Rufina Lim, as survi
ving spouse and duly represented by her nephew George Luy, filed a joint petition for
the administration of the estate of Pastor Y. Lim before the Regional Trial Court of
Quezon City.

Private respondent corporations, whose properties were included in the inventory of the
estate of Pastor Y. Lim, then filed a motion for the lifting of lis pendens and motion
for exclusion of certain properties from the estate of the decedent.
Rufina alleged that the assets of these corporations were owned wholly by Pastor; that
these corporations themselves are owned by Pastor and they are mere dummies of Pa
stor. The corporations filed a motion for exclusion from the estate. They presented pro
of (Torrens Titles) showing that the assets of the corporations are in their respective name
s and titles. The probate court denied their motion. The Court of Appeals reversed the
decision of the probate court.

ISSUE: Whether the corporations and/or their assets should be included in the inventor
y of the estate.

RULING : No. As regards the assets, the corporations were able to present their respe
ctive Torrens Titles over the disputed assets. It is true that a probate court may pass
upon the question ownership albeit in a provisional manner but still, a Torrens Title c
annot be attacked collaterally in a probate proceeding, it must be attacked directly in a
separate proceeding.

As regards the corporations, to include them in the inventory is tantamount to the pie
rcing of the veil of corporate fiction because the probate court effectively adopted the
theory of Rufina. This cannot be done. Firstly, the probate court is sitting in a limited
capacity. Secondly, Rufina was not able to present sufficient evidence that indeed the
corporations are mere conduits of Pastor. 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 a sufficient reason for disregarding the fiction of separate corporate personaliti
es. The veil can’t be pierced without any showing that indeed the corporation is being
used merely as a dummy. To disregard the separate juridical personality of a corporat
ion, the wrong-doing must be clearly and convincingly established. It cannot be presumed
.

MARUBENI CORPORATION VS. LIRAG,

FACTS OF THE CASE

Petitioner Marubeni Corporation is a foreign corporation organized and existing under
the laws of Japan. It was doing business in the Philippines through its duly licensed,
wholly owned subsidiary companies.

On January 27, 1989, respondent Felix Lirag filed with the Regional Trial Court, Mak
ati a complaint for specific performance and damages claiming that petitioners owed hi
m the sum of P6, 000,000.00 representing commission pursuant to an oral consultancy
agreement with Marubeni.

The consultancy agreement was not reduced into writing because of the mutual trust b
etween Marubeni and the Lirag family. Their close business and personal relationship
dates back to 1960, when respondent’s family was engaged in the textile fabric manuf
acturing business, in which Marubeni supplied the needed machinery, equipment, spare
parts and raw materials.

In compliance with the agreement, respondent Lirag made representations with various
government officials, arranged for meetings and conferences, relayed pertinent informat
ion as well as submitted feasibility studies and project proposals, including pertinent d
ocuments required by petitioners. As petitioners had been impressed with respondent’s
performance, six (6) additional projects were given to his group under the same underta
king.

One of the projects handled by respondent Lirag, the Bureau of Post project, amountin
g to P100, 000,000.00 was awarded to the “Marubeni-Sanritsu tandem.” Despite respon
dent’s repeated formal verbal demands for payment of the agreed consultancy fee, petit
ioners did not pay. In response to the first demand letter, petitioners promised to reply
within fifteen (15) days, but they did not do so.

On April 29, 1993, the trial court promulgated a decision and ruled that respondent is
entitled to a commission. Respondent was led to believe that there existed an oral co
nsultancy agreement. Hence, he performed his part of the agreement and helped petiti
oners get the project.

The Court of Appeals relied on the doctrine of admission by silence in upholding the
existence of a consultancy agreement, noting that petitioner Tanaka’s reaction to respo
ndent’s September 26, 1988 demand letter was not consistent with their claim that ther
e was no consultancy agreement. On the contrary, it lent credence to respondent’s clai
m that they had an existing consultancy agreement. The Court of Appeals observed that
if indeed there were no consultancy agreement, it would have been easy for petitione
rs to simply deny respondent’s claim. Yet, they did not do so. The conglomeration o
f these circumstances bolstered the existence of the oral consultancy agreement.

ISSUE : In this appeal, petitioners raise the following issues: (1) whether or not there
was a consultancy agreement between petitioners and respondent; and corollary to this,
(2) whether or not respondent is entitled to receive a commission if there was, in fact
, a consultancy agreement.

RULING : Wherefore, the petition is granted. The decision of the court of appeals is
hereby set aside. Civil Case No. 89-3037 filed before the Regional Trial Court, Branch
143, Makati City is hereby dismissed. No costs

An assiduous scrutiny of the testimonial and documentary evidence extant leads us to

the conclusion that the evidence could not support a solid conclusion that a consultanc
y agreement, oral or written, was agreed between petitioners and respondent. Responde
nt attempted to fortify his own testimony by presenting several corroborative witnesses.
However, what was apparent in the testimonies of these witnesses was the fact that t
hey learned about the existence of the consultancy agreement only because that was wh
at respondent told them.

In civil cases, he who alleges a fact has the burden of proving it; a mere allegation
is not evidence. He must establish his cause by a preponderance of evidence, which r
espondent failed to establish in the instant case.

Any agreement entered into because of the actual or supposed influence which the party
has, engaging him to influence executive officials in the discharge of their duties, whi
ch contemplates the use of personal influence and solicitation rather than an appeal to
the judgment of the official on the merits of the object sought is contrary to public p
olicy. Consequently, the agreement, assuming that the parties agreed to the consultancy
, is null and void as against public policy. Therefore, it is unenforceable before a cour
t of justice.

In light of the foregoing, we rule that the preponderance of evidence established no consul
tancy agreement between petitioners and respondent from which the latter could anchor
his claim for a six percent (6%) consultancy fee on a project that was not awarded t
o petitioners.

Del Rosario vs National Labor Relations Commission

Facts: In POEA case no. 85-06-0394, the Philippine Overseas Employment Administration (P
OEA) promulgated a decision on February 4,1986 dismissing the complaint for money claims
for lack of merit. The decision was appealed to the NLRC, which on April 30, 1987 reversed
the POEA decision and ordered Philsa Construction and Trading Co.Ind and Ariel Enterprises
(the foreign employer) to jointly and severally pay private respondent the peso equivalent of
$16,039,000 salary differentials and $2,420.03 as vacation leave benefits. A writ of execution
was issued by the POEA but it was returned unsatisfied incapable of satisfying the judgemen
t. Private respondent moved for the issuance of an alias writ against the officers of Philsa. Thi
s motion was opposed by the officers led by petitioners, the president and general manager of
the corporation. However, POEA issued a resolution ordering the sheriff to execute against th
e properties of the petitioner and if insufficient, against the cash and/or surety bond of bondin
g company concerned for the full satisfaction of the judgement awarded.

Issue: Whether or not the POEA resolution is proper.

Held: No. Under the law, a corporation is bestowed juridical personality, separate and distinct
from its stockholders. But when the juridical personality of the corporation is used to defeat p
ublic convenience, justify wrong, protect or defend crime, the corporation shall be considered
as a mere association of persons and its responsible officers and/or stockholders shall be indi
vidually liable. For the same reasons, a corporation shall be liable for obligations of a stockho
lder or a corporation and its successor-in-interest shall be considered as one and the liability o
f the former shall attach to the latter.

But for the separate juridical personality of a corporation to be disregarded, the wrong doing
must be clearly and convincingly established. It cannot be presumed.

Thus, at the time Philsa allowed its license to lapse in 1985 and even at the time it was deliver
ed in 1986, there was yet no judgement in favor of private respondent. An intent to evade pay
ment of his claims cannot therefore be implied from the expiration of Phila’s license and its d
elisting.

Neither will the organization of Philsa International Placement and Services Corp. and its regi
stration with the POEA as a private employment agency imply fraud since it was organized a
nd registered in 1981, several years before private respondent filed his complaint with the PO
EA in 1985. The creation of the second anticipation of private respondent’s money claims and
the consequent adverse judgement against Philsa.
Likewise, substantially identity of the incorporators of the two corporations does not necessar
ily imply fraud.

Manuel R. Dulay Enterprises, Inc. Vs. COURT of Appeals

FACTS OF THE CASE

Manuel Dulay Enterprises Inc is a domestic corporation with family relatives as its me
mbers; Manuel as the president, treasurer, and general manager, Atty. Virgilio as the v
ice president, Plaridel Jose as the secretary, Celia Dulay and Linda DulayMendoza as
members. The corporation owns a 16-unit apartment in Pasay. Through a Board Reso
lution, the corporation sold the property to respondents Veloso with a right to repurcha
se. Without the knowledge of Manuel, Veloso mortgaged the apartment to Torres. Vel
oso failed to fulfill the obligation which led to the foreclosure of the property which
was subsequently bought by mortgagee Torres as the highest bidder. Veloso assigned t
he right to redeem to Manuel as a result of the extra judicial sale. Neither Manuel no
r Veloso was able to redeem the property so Torres applied for the consolidation of o
wnership for the said property. Torres also filed for a writ of possession against Velos
o and Manuel. According to the lower court, since the corporation had not given perm
ission to the sale, the corporation should be included. The corporation petitioned for th
e annulment of the sale of the apartment by Manuel to Veloso arguing that not all its
members had consented to the sale of the apartment. RTC denied the petition of the
corporation and ruled in favor of Torres to which CA affirmed; hence, this petition

ISSUE: WON the respondent court erred in binding the petitioner corporation for the t
ransaction of Manuel Dulay by selling the apartment to Maria Veloso.

RULING : NO, Court of Appeals did not commit an error in its decision. In the insta
nt case, petitioner corporation is classified as a close corporation and consequently a b
oard resolution authorizing the sale or mortgage of the subject property is not necessar
y to bind the corporation for the action of its president. At any rate, corporate action
taken at a board meeting without proper call or notice in a close corporation is deeme
d ratified by the absent director unless the latter promptly files his written objection w
ith the secretary of the corporation after having knowledge of the meeting which, in h
is case, petitioner Virgilio Dulay failed to do.

The privilege of being treated as an entity distinct and separate from its stockholder o
r members is therefore confined to its legitimate uses and is subject to certain limitati
ons to prevent the commission of fraud or other illegal or unfair act. When the corpor
ation is used merely as an alter ego or business conduit of a person, the law will reg
ard the corporation as the act of that person. The Supreme Court had repeatedly disre
garded the separate personality of the corporation where the corporate entity was used t
o annul a valid contract executed by one of its members.

Virgilio E. Dulay's protestations of complete innocence to the effect that he never part
icipated nor was even aware of any meeting or resolution authorizing the mortgage or
sale of the subject premises is difficult to believe. On the contrary, he is very much
privy to the transactions involved. The fact that petitioner Virgilio Dulay executed an
affidavit that he was a signatory witness to the execution of the postdated Deed of A
bsolute Sale of the subject property in favor of private respondent Torres indicates that
 he was aware of the transaction executed between his Manuel and private respondents
and had, therefore, adequate knowledge about the sale of the subject property to priv
ate respondents.

Consequently, Petitioner Corporation is liable for the act of Manuel Dulay and the sale
of the subject property to private respondents by Manuel Dulay is valid and binding.

THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD. vs.NATIONAL L
ABOR RELATIONS COMMISSION, ARBITER CEFERINA J.DIOSANA AND MAR
CELO G. SANTOS
MHICL is a corporation duly organized and existing under the laws of HongKong. MHC is a
n “incorporator” of MHICL, owning 50% of its capital stock. By virtue of a “management agr
eement” with the Palace Hotel (Wang Fu CompanyLimited), MHICL trained the personnel an
d staff of the Palace Hotel at Beijing,China.Respondent Santos accepted an employment offer
from Palace Hotel. OnNovember 5, 1988, respondent Santos left for Beijing, China. He starte
d to work atthe Palace Hotel. A year later he received a letter stating that his employment is b
eing terminated due to business reverses brought about by the political upheavalin China. On
February 20, 1990, respondent Santos filed a complaint for illegaldismissal.

ISSUE: Whether or not the doctrine of piercing the corporate veil is available to make MHC l
iable for damages.

RULING: NO. MHC, as a separate and distinct juridical entity cannot be held liable. True,M
HC is an incorporator of MHICL and owns fifty percent (50%) of its capital stock.However, t
his is not enough to pierce the veil of corporate fiction between MHICLand MHC.Piercing th
e veil of corporate entity is an equitable remedy. It is resorted to when the corporate fiction is
used to defeat public convenience, justify wrong,protect fraud or defend a crime. It is done on
ly when a corporation is a mere alterego or business conduit of a person or another corporatio
n.In Traders Royal Bank v. Court of Appeals, the court held that “the mereownership by a sin
gle stockholder or by another corporation of all or nearly all ofthe capital stock of a corporatio
n is not of itself a sufficient reason for disregardingthe fiction of separate corporate personaliti
es.” The tests in determining whether the corporate veil may be pierced are: First,the defenda
nt must have control or complete domination of the other corporation’sfinances, policy and bu
siness practices with regard to the transaction attacked. There must be proof that the other cor
poration had no separate mind, will orexistence with respect the act complained of. Second, c
ontrol must be used by the defendant to commit fraud or wrong. Third, the aforesaid control
or breach of dutymust be the proximate cause of the injury or loss complained of. The absenc
e ofany of the elements prevents the piercing of the corporate veil.It is basic that a corporation
has a personality separate and distinct from those composing it as well as from that of any ot
her legal entity to which it may berelated. Clear and convincing evidence is needed to pierce t
he veil of corporatefiction. In this case, the court found no evidence to show that MHICL and
MHC areone and the same entity.

PHILIPPINE COMMERCIAL AND INTERNATIONAL BANK (now BANCO DE OR

O-EPCI, INC.) v. DENNIS CUSTODIO, et al. 545 SCRA 367 (2008)

A corporation has personality separate and district from those who compose it.
Facts : Rolando Francisco (Francisco) and his wife, on behalf of Traders Group Corporation (
ROL-ED), entered into a Foreign Bills Purchase Line Agreement (FBPLA) with the PCIB-Gr
eenhills bank to which Spouses Francisco deposited four dollar checks. The checks were clear
ed and paid by Chase Manhattan Bank but they were subsequently dishonored for insufficient
funds. Chase Manhattan Bank thus debited the amount of the dishonored checks from the acc
ount of PCIB-Greenhills which it maintained with it. Having received notice of the debiting fr
om its account, PCIB-Greenhills in turn debited from Francisco’s joint account the partial pay
ment of the dishonored checks. In the meantime, Wilfredo Gliane remitted US$42,300 to the
above-said joint account of Francisco at the PCIB-Greenhills but it was no longer feasible as t
he amount had already been applied as partial payment of Francisco’s outstanding obligation
with PCIB-Greenhills. A complaint against PCIB and Francisco for specific performance and
damages was subsequently filed before the Regional Trial Court (RTC) of Makati to recover t
he remittance. The RTC held PCIB solely liable to pay the sum of US$42,300 and decreed tha
t PCIB had the right of reimbursement of the amount from Francisco. On appeal, the Court of
Appeals freed PCIB from liability and ruled that Francisco is solely liable thereof. Hence, thi
s petition. Francisco contends that he has a separate personality from ROL-ED.

ISSUE: Whether or not the separate and distinct legal personality of Francisco from ROL-ED
be considered in determining his liability.

HELD: While Francisco claims that the loan in question was that of ROL-ED and not his, he,
as earlier stated, deposited the US$651,000 checks in his joint account with Erlinda and not in
the account of ROL-ED. At all events, while a corporation is clothed with a personality separ
ate and distinct from the persons composing it, the veil of separate corporate personality may
be lifted when it is used as a shield to confuse legitimate issues, or where lifting the veil is nec
essary to achieve equity or for the protection of the creditors. In the case at bar, there can be n
o mistake that Francisco belatedly invoked the separate identity of ROL-ED to evade his liabi
lity to PCIB.

Tan Boon Bee & Co. v. Jarencio, 163 SCRA 205

FACTS: In 1972, Anchor Supply Co. (ASC), through Tan Boon Bee, entered into a c
ontract of sale with Graphic Publishing Inc. (GPI) whereby ASC shall deliver paper pr
oducts to GPI. GPI paid a down payment but defaulted in paying the rest despite dem
and from ASC. ASC sued GPI and ASC won. To satisfy the indebtedness, the trial co
urt, presided by Judge Hilarion Jarencio, ordered that one of the printing machines of
GPI be auctioned. But before the auction can be had, Philippine American Drug Comp
any (PADCO) notified the sheriff that PADCO is the actual owner of said printing ma
chine. Notwithstanding, the sheriff still went on with the auction sale where Tan Boo
n Bee was the highest bidder. Later, PADCO filed with the same court a motion to nu
llify the sale on execution. The trial court ruled in favor of PADCO and it nullified s
aid auction sale. Tan Boon Bee assailed the order of the trial court. Tan Boon Bee av
erred that PADCO holds 50% of GPI; that the board of directors of PADCO and GPI
is the same; that the veil of corporate fiction should be pierced based on the premise
s. PADCO on the other hand asserts ownership over the said printing machine; that it is
merely leasing it to GPI.

ISSUE: Whether or not the veil of corporate fiction should be pierced.

 HELD: Yes. PADCO, as its name suggests, is a drug company not engaged in the p
rinting business. So it is dubious that it really owns the said printing machine regardle
ss of PADCO‘s title over it. Further, the printing machine, as shown by evidence, has
been in GPI‘s premises even before the date when PADCO alleged that it acquired o
wnership thereof. Premises considered, the veil of corporate fiction should be pierced;
PADCO and GPI should be considered as one. When a corporation is merely an adjun
ct, business conduit or alter ego of another corporation the fiction of separate and dist
inct corporation entities should be disregarded.

TOMAS LAO CONSTRUCTION Vs. NATIONAL LABOR RELATIONS COMMI

SSION G.R. No. 116781

FACTS OF THE CASE

Private respondents individually filed complaints for illegal dismissal against petitioners
with the NLRC. They alleged that they were hired for various periods as construction
workers in different capacities, alternately working for petitioners Tomas Lao Corporati
on (TLC), Thomas and James Developers (T&J) and LVM Construction Corporation (L
VM), altogether informally referred to as the “Lao Group of Companies,” the 3 entitie
s comprising a business conglomerate exclusively controlled and managed by members
of the Lao family. With this arrangement, workers were transferred whenever necessar
y to on-going projects of the same company or of the others, or were rehired after th
e completion of the project or project phase to which they were assigned.

In 1989, Andres Lao, Managing Director of LVM and President of T&J, issued a me
morandum requiring all workers and company personnel to sign employment contract f
orms and clearances which were issued on July 1, 1989 but antedated January 10, 198
9. These were to be used allegedly for audit purposes pursuant to a joint venture agre
ement between LVM and T&J. The contracts expressly described the construction work
ers whose employments were for a definite period, i.e. upon the expiration of the cont
ract period or the completion of the project for which the workers was hired.

Except for Gomez, all private respondents refused to sign, contending that this scheme
was designed to downgrade their status from regular employees to mere project emplo
yees. As such, their salaries were withheld. Labor Arbiter Velasquez dismissed the com
plaint finding private respondents to be project employees who can be terminated upon
project completion. NLRC reversed the decision, finding private respondents to be reg
ular employees who were dismissed without just cause and denied due process. In gra
nting monetary awards to complainants, the NLRC disregarded the veil of corporate fic
tion and treated the three corporations as one on the basis of petitioners’ admission th
at “the three operated as one, intermingling and commingling all its resources, including
manpower facility.”

ISSUE Whether the NLRC erred when it pierced the veil of corporate personality of p
etitioner-corporations.

RULING The NLRC did not err in disregarding the veil of separate corporate persona
lity and holding petitioners jointly and severally liable for private respondents’ back w
ages and separation pay. The records disclose that the three corporations were in fact s
ubstantially owned and controlled by members of the Lao family. A majority of the o
utstanding shares of stock in LVM and T&J is owned by the Lao family. The Lao Gr
oup of Companies therefore is a closed corporation where the incorporators and directo
rs belong to a single family. Petitioners are engaged in the same line of business unde
r one management and use the same equipment including manpower services. Where it
appears that three business enterprises are owned, conducted and controlled by the sa
me parties, both law and equity will, when necessary to protect the rights of third per
sons, disregard the legal fiction that the three corporations are distinct entities and treat
them as identical.

Hence, the Court disregards the separate personalities of the three corporations and at
the same time declare the members of the corporations jointly and severally liable wit
h the corporations for the monetary awards due to private respondents. The fiction of
law that a corporation as a separate juridical entity was envisaged for convenience and
to serve justice; therefore it should not be used as a subterfuge to commit injustice an
d circumvent labor laws.