RUBEN SAW, DIONISIO SAW, et al.

vs Court of Appeals
G.R. No. 90580; April 8, 1991
Cruz, J.

Facts:
A collection suit with preliminary attachment was filed by Equitable Banking Corporation against
Freeman, Inc. and Saw Chiao Lian, its President and General Manager. The petitioners moved to intervene,
alleging that (1) the loan transactions between Saw Chiao Lian and Equitable Banking Corp. were not approved
by the stockholders representing at least 2/3 of corporate capital; (2) Saw Chiao Lian had no authority to contract
such loans; and (3) there was collusion between the officials of Freeman, Inc. and Equitable Banking Corp. in
securing the loans. The motion to intervene was denied, and the petitioners appealed to the Court of Appeals.
Meanwhile, Equitable and Saw Chiao Lian entered into a compromise agreement which they submitted
to and was approved by the lower court. However, because it was not complied with, Equitable secured a writ of
execution, and two lots owned by Freeman, Inc. were levied upon and sold at public auction to Freeman
Management and Development Corp. The Court of Appeals sustained the denial of the petitioners' motion for
intervention, holding that "the compromise agreement between Freeman, Inc., through its President, and Equitable
Banking Corp. will not necessarily prejudice petitioners whose rights to corporate assets are at most inchoate,
prior to the dissolution of Freeman, Inc. . . . And intervention under Sec. 2, Rule 12 of the Revised Rules of Court
is proper only when one's right is actual, material, direct and immediate and not simply contingent or expectant."
Petitioners now argue that their right to intervene is based on their interests as stockholders.

Issue:
Whether or not petitioners have the right to intervene. Commented [u1]: change issue

Held:
No. To allow intervention, [a] it must be shown that the movant has legal interest in the matter in litigation,
or otherwise qualified; and [b] consideration must be given as to whether the adjudication of the rights of the
original parties may be delayed or prejudiced, or whether the intervenor's rights may be protected in a separate
proceeding or not. Both requirements must concur as the first is not more important than the second.
The interest which entitles a person to intervene in a suit between other parties must be in the matter in
litigation and of such direct and immediate character that the intervenor will either gain or lose by the direct legal
operation and effect of the judgment. Otherwise, if persons not parties of the action could be allowed to intervene,
proceedings will become unnecessarily complicated, expensive and interminable. Stockholders’ rights to
corporate properties are merely inchoate. Intervention under the Revised Rules of Court is proper only when one's
right is actual, material, direct and immediate and not simply contingent or expectant.
Harry Stonehill, et al. vs. Hon. Jose Diokno, in his capacity as Secretary of Justice, et al.
GR No. L-19550; June 19, 1967
Concepcion, C.J.

Facts:
Herein respondents issued a total of 42 search warrants against petitioners Stonehill, Brooks, and Beck
and/or the corporations of which they were officers. The warrants directed to any peace officer to search the
persons of petitioners and premises of their offices, warehouses and/or residences to search for personal properties
like “books of accounts, financial records, vouchers, correspondence, receipts, ledgers, journals, portfolios, credit
journals, typewriters, and other documents showing all business transactions including disbursement receipts,
balance sheets and profit and loss statements and Bobbins(cigarettes)” as the subject of the offense for violations
of Central Bank Act, Tariff and Customs Laws, Internal Revenue Code, and Revised Penal Code.
The petitioners were consequently subjected to deportation proceedings and were constrained to question
the legality of the searches and seizures as well as the admissibility of those seized as evidence against them. The
petitioners argued that the search warrants were null and void as their issuance violated the Constitution and the
Rules of Court for being general warrants.
Thus, they filed a petition with the Supreme Court for certiorari, prohibition, mandamus and
injunction to prevent the seized effects from being introduced as evidence in the deportation cases against the
petitioner. The court issued the writ only for those effects found in the petitioner's residence, but not for those
seized from the offices of the corporations.

Issue:
Whether or not the petitioners have a legal standing to question the legality of search warrants against the
corporation?

Held: NO.

Petitioners can only assail the search conducted in their residences, but not those done in the corporations’
premises. The corporations have a personality separate and distinct from the personality of herein petitioners,
regardless of the amount of shares of stock or interest of each in the said corporation, and whatever the offices
they hold therein may be. The legality of a seizure can be contested only by the party whose rights have been
impaired thereby, and that the objection to an unlawful search and seizure is purely personal and cannot be availed
of by third parties.

Thus, herein petitioners may not validly object to the use in evidence against them of the documents,
papers and things seized from the offices and premises of the corporations, since the right to object to the
admission of said papers in evidence belongs exclusively to the corporations, to whom the seized effects belong,
and may not be invoked by the corporate officers in proceedings against them in their individual capacity.
Eduardo Claparols vs CIR
G.R. No. L-30822; July 31, 1975
Makasiar, J.
Facts: This is a Petition for Certiorari to set aside the order of respondent C.I.R. directing petitioners to pay
backwages and bonuses to private respondents as well as its resolution denying their Motion for Reconsideration.
A complaint for Unfair Labor Practice was filed by respondents against petitioners in connection with their
dismissal from the Claparols Steel and Nail Plant. The C.I.R. rendered a decision finding Claparols guilty of union
busting having dismissed said complainants because of their union activities. With respect to the computation of
the award of backwages and bonuses, the C.I.R. Chief Examiner submitted his report containing three
computations – (a) the first covers the period February 1, 1957 to October 31, 1964; (b) the second is up to and
including December 7, 1962, when the corporation stopped operations; while (c) the third is only up to June 30,
1957 when the Claparols Steel and Nail Plant ceased to operate. When the Claparols Steel and Nail Plant ceased
operations, it was immediately succeeded by the Claparols Steel Corporation the next day. Petitioners argued, by
invoking Sta. Cecilia Sawmills vs C.I.R., that assuming the workers are entitled to backwages such should only
be limited to three months since Claparols Steel and Nail Plant ceased to operate on December 7, 1962 due to
enormous business reverses. On the other hand, respondent workers argue that the two corporations are one and
the same.
Issue: Whether or not the doctrine in Sta. Cecilia Sawmills vs C.I.R. should be adopted.
Held: No. It is very clear that the latter corporation was a continuation and successor of the first entity, and its
emergence was skillfully timed to avoid the financial liability that already attached to its predecessor, the
Claparols Steel and Nail Plant. Both predecessor and successor were owned and controlled by petitioner Eduardo
Claparols and there was no break in the succession and continuity of the same business. This “avoiding-the-
liability” scheme is very patent, considering 90% of the subscribed shares of stocks of the Claparols Steel
Corporation (the second corporation) was owned by respondent (herein petitioner) Claparols himself, and all the
assets of the dissolved Claparols Steel and Nail Plant were turned over to the emerging Claparols Steel
Corporation. It is very obvious that the second corporation seeks the protective shield of a corporate fiction whose
veil in the second case could, and should, be pierced as it was deliberately and maliciously designed to evade its
financial obligation to its employees.
LUISITO PADILLA and PHOENIX-OMEGA DEVELOPMENT AND MANAGEMENT
CORPORATION vs. COURT OF APPEALS and SUSANA REALTY, INC.
G.R. No. 123893 November 22, 2001
Quisumbing, J.

Facts:
Susana Realty, Inc. (SRI) sold to LRTA several parcels of land in Taft, reserving unto itself the right of
first refusal to develop the property should the LRTA decide to lease the right to develop the property. LRTA,
SRI and Phoenix Omega Development and Management Corporation entered into tripartite agreement allowing
Phoenix to construct commercial stalls in the property. Phoenix assigned its rights over the property to its sister
company, PKA Development and Management (PKA) which deed of assignment was signed by Gatchalian as
President and Padilla as President and General Manager.
Meanwhile, SRI sold part of its property to a third party. Repeated requests for approval of amended plans
were not heeded by SRI, prompting PKA to file an action for the rescission of contract of lease against SRI
alleging that SRI’s refusal to approve the plans without justifiable reason deprived it of the use of the commercial
stalls, thereby incurring losses. SRI claimed that it was PKA which violated their contract in failing to complete
within 6 months the construction of such stalls. RTC granted the rescission. CA affirmed. A writ of execution
was issued against PKA, Phoenix and of Padilla.
Alleging that the writ of execution cannot be enforced against them, herein petitioners filed with RTC an
MR for the annulment of the alias writ, alleging that the orders are confiscatory since they were never parties to
the case filed by PKA against SRI. The MR was denied. Petitioners filed a petition for certiorari with the CA
which was also denied based on the conclusion that PKA and Phoenix-Omega are one and the same.

Issue: Whether or not the trial court had jurisdiction over petitioners, to justify the issuance of an alias
writ of execution against their properties

Held: No. In the present case, the trial court never acquired jurisdiction over petitioners through summons or
voluntary appearance. Neither of the petitioners was even impleaded as a party to the case. Without the trial court
having acquired jurisdiction over petitioners, the latter could not be bound by the decision of the court. Execution
can only be issued against a party and not against one who was not accorded his day in court. To levy upon their
properties to satisfy a judgment in a case in which they were not even parties is not only inappropriate; it most
certainly is deprivation of property without due process of law.

Padilla participated in the proceedings 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.
MARVEL BUILDING CORPORATION, ET AL., vs. SATURNINO DAVID
G.R. No. L-5081; February 24, 1954
LABRADOR, J.:

FACTS: Various properties including three parcels of land, with buildings known as the Aguinaldo and the Wise
buildings and the Dewey Boulevard-Padre Faura Mansion situated thereon, all registered in the name of the
Corporation were seized and distrained by defendant Collector of Internal Revenue to collect war profits taxes
assessed against plaintiff Maria B. Castro (Maria).

Plaintiffs as stockholders of the Corporation sought to enjoin the defendant from selling the properties at public
auction. They allege that the properties belong to the Corporation and not to Maria, while the defendant claims
that Maria is the true and sole owner of all the subscribed stock of the Corporation, including those appearing to
have been subscribed and paid for by the other members, and consequently she is also the true and exclusive
owner of the properties seized.

The trial court held that the evidence, which is mostly circumstantial, fails to show to its satisfaction that Maria
is the true owner of all the stock certificates of the corporation, because the evidence is susceptible of two
interpretations and an interpretation may not be made which would deprive one of the property without due
process of law. Hence, this petition.

ISSUE: Is Maria B. Castro the owner of all the shares of stocks of Marvel Building Corporation and the
other stockholders mere dummies?

HELD: Yes. In general the evidence offered by the plaintiffs is testimonial and direct evidence, easy of
fabrication. Conversely, that offered by defendant, documentary and circumstantial is not only difficult of
fabrication but in most cases found in the possession of plaintiffs.The circumstantial evidence is not only
convincing; it is conclusive.

Maria would not have asked the alleged stockholders to endorse their stock certificates, or be keeping these in her
possession, if they were really the owners. They never would have consented that Maria keep the funds without
receipts or accounting, nor that she manages the business without their knowledge or concurrence, were they
owners of the stocks in their own rights. Each and every one of the facts all set forth above, in the same manner,
is inconsistent with the claim that the stockholders, other than Maria, own their shares in their own right. On the
other hand, each and every one of them, and all of them, can point to no other conclusion than that Maria was the
sole and exclusive owner of the shares and that they were only her dummies.

It is the opinion of the Court that the facts and circumstances duly set forth prove conclusively and beyond
reasonable doubt that Maria B. Castro is the sole and exclusive owner of all the shares of stock of the Marvel
Building Corporation and that the other partners are her dummies.
Yutivo Sons Hardware Company v. Court of Tax Appeals and CIR
G.R. No. L-13203, January 28, 1961
Gutierrez-David, J.

Facts:
Yutivo was engaged in the importation and sale of hardware supplies and equipment. After the liberation,
it resumed its business and until June 1946 bought a number of cars and trucks from General Motors Overseas
Corporation, an American corporation licensed to do business in the Philippines. As importer, GM paid sales tax
prescribed by the Tax Code on the basis of its selling price to Yutivo. Said tax being collected only once on
original sales, Yutivo paid no further sales tax on its sales to the public. On June 1946, the Southern Motors, Inc.
was organized to engage in the business of selling cars, trucks and spare parts. Its original authorized capital stock
was P1,000,000 divided into 10,000 shares with a par value of P100 each. At the time of its incorporation 2,500
shares worth P250,000 appear to have been subscribed into equal proportions by Yu Khe Thai, Yu Khe Siong,
Hu Kho Jin, Yu Eng Poh, and Washington Sycip. The first three named subscribers are brothers, being sons of
Yu Tiong Yee, one of Yutivo's founders. The latter two are respectively sons of Yu Tiong Sin and Albino Sycip,
who are among the founders of Yutivo. After the incorporation of SM and until the withdrawal of GM from the
Philippines, the cars and tracks purchased by Yutivo from GM were sold by Yutivo to SM which, in turn, sold
them to the public in the Visayas and Mindanao.
When GM decided to withdraw from the Philippines in the middle of 1947, the U.S. manufacturer of GM
cars and trucks appointed Yutivo as importer for the Visayas and Mindanao, and Yutivo continued its previous
arrangement of selling exclusively to SM. Yutivo, as importer, paid sales tax prescribed on the basis of its selling
price to SM, while SM paid no sales tax on its sales to the public. The Collector of Internal Revenue made an
assessment upon Yutivo and demanded from the latter deficiency sales tax plus surcharge covering the period
from the third quarter of 1947 to the fourth quarter of 1949, claiming that the taxable sales were the retail sales
by SM to the public and not the sales at wholesale made by Yutivo to the latter inasmuch as SM and Yutivo were
one and the same corporation, the former being the subsidiary of the latter.

Issue: Whether or not Southern Motors is a mere instrumentality or subsidiary of Yutivo?

Held:
Yes. It is not disputed that the petitioner, which is engaged principally in hardware supplies and
equipment, is completely controlled by the Yutivo, Young or Yu family. The founders of the corporation are
closely related to each other either by blood or affinity, and most of its stockholders are members of the Yu
(Yutivo or Young) family. SM is under the management and control of Yutivo by virtue of a management contract
entered into between the two parties. In fact, the controlling majority of the Board of Directors of Yutivo is also
the controlling majority of the Board of Directors of SM. At the same time the principal officers of both
corporations are identical. In addition 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. There is therefore no doubt that by virtue of such
control, the business, financial and management policies of both corporations could be directed towards common
ends. Southern Motors being but a mere instrumentality, or adjunct of Yutivo, the Court of Tax Appeals correctly
disregarded the technical defense of separate corporate entity in order to arrive at the true tax liability of Yutivo.
Petitioner shall be ordered to pay to respondent the sum of P820,549.91, plus 25% surcharge thereon for late
payment.
Emilio Cano Enterprises, Inc. v. Court of Industrial Relations et al
G.R. No. L-20502, February 26, 1965
Bautista Angelo, J.

Facts:
A complaint for Unfair Labor Practice was filed before the Court of Industrial Relations against Emilio,
Ariston, and Rodolfo, all surnamed Cano, the president and proprietor, field supervisor, and manager respectively
of Emilio Cano Enterprises, Inc. Both Emilio and Rodolfo were found guilty of Unfair Labor Practice and as a
consequence thereof, Honorata Cruz was ordered reinstated to her former position with payment of backwages
together with other rights and privileges thereto appertaining. Thereafter, an order of execution was issued and
directed against the properties of herein petitioner corporation. This prompted petitioner to file an exparte Motion
to Quash the writ on the ground that the judgment sought to be enforced was not rendered against it which is a
juridical entity separate and distinct from its officials.

Issue:
Whether or not the judgment rendered against Emilio and Rodolfo Cano in their capacity as officials of
the corporation Emilio Cano Enterprises, Inc. be made effective against the property of the latter which is
not a party to this case.

Held:
Yes. While it is an undisputed rule that a corporation has a personality separate and distinct from its
members or stockholders because of a fiction of the law, here we should not lose sight of the fact that the Emilio
Cano Enterprises, Inc. is a closed family corporation where the incorporators and directors belong to one single
family. This is an instance where the corporation and its members can be considered as one. And to hold such
entity liable for the acts of its members is not to ignore the legal fiction but merely to give meaning to the principle
that such fiction cannot be invoked if its purpose is to use it as a shield to further end subversive of justice. And
so it has been held that while a corporation is a legal entity existing separate and distinct from the persons
composing it, that concept cannot be extended to point beyond its reason and policy, and when invoked in support
of an end subversive of this policy it should be disregarded by the courts. No benefit can be attained if this case
were to be remanded to the court a quo merely in response to a technical substitution of parties for such would
only cause an unwarranted delay that could work to Honorata’s prejudice.
NATIONAL FEDERATION OF LABOR UNION (NAFLU) AND TERESITA LORENZO, ET AL. vs.
HON. MINISTER BLAS OPLE, as Minister of Labor and Employment; LAWMAN
INDUSTRIAL/LIBRA GARMENTS/DOLPHIN ENTERPRISES, respondents

G.R. No. L-68661 ; July 22, 1986

GUTIERREZ, JR. J.

FACTS: Lawman Indsutrial Corporation was previously found guilty of unfair labor practice when, pending
negotiations for their collective agreement, for having declared temporary cessation of its operations, in reality it
committed illegal lockout. The Minister of Labor and Employment found Lawman to be in bad faith as it evidently
maintained a run-away shop when its machines were transferred to and its operations continued through Libra
Garments, and upon the employees’ finding out of such, the name was further changed to Dolphin Enterprises.
“Under Libra, new applicants for employment were called even as the company continued to manufacture the
same products but under the name of LIBRA GARMENTS. When this was discovered by the workers, LIBRA
GARMENTS was changed to DOLPHIN GARMENTS.”

In its defense, Lawman contended that due to its failure to settle its rentals, it had to close down for it had no kore
plant and building when they were repossessed by owner Pioneer Texturizing Corporation. Nevertheless, it
admitted it violated the order of the Labor Ministry enjoining any encumbrance or transfer of the properties of
Lawman without prior clearance from this Office. The evident bad faith, fraud and deceit committed by the
company leads us (Minister of Labor and Employment) to affirm the union's position that the veil of corporate
fiction should be pierced

ISSUE: Whether of not the veil of the corporation should be pierced?

.
HELD: Yes, the Court ruled in the affirmative.

It is very obvious from the findings of the Labor Minister that the second corporation seeks the protective shield
of a corporate fiction to achieve an illegal purpose. As enunciated in the case of Claparols v. Court of Industrial
Relations (65 SCRA 613) its veil in the present case should, therefore, be pierced as it was deliberately and
maliciously designed to evade its financial obligations to its employees.

After finding that Lawman Industrial Corporation had transferred its business operations to Libra Garments
Enterprises, which later changed its name to Dolphin Garments Enterprises, the public respondent cannot deny
reinstatement to the petitioners simply because Lawman Industrial Corporation has ceased its operations.

As Libra/Dolphin Garments is but an alter-ego of the old employer, Lawman Industrial, the former must bear the
consequences of the latter's unfair acts by reinstating the petitioners to their former positions without loss of
seniority rights .

The allegation of Lawman that it suffered losses so as to justify stoppage of operations was found more
apparent than real. In addition, the Solicitor General submits the following observations: ". . . [T]he net sales of
LAWMAN for the year 1981 was P2,117,203.95 whereas for the shorter period of January to June 1982, its
next sales was already P2,359,479.25, surpassing its entire 1981 sales. This clearly shows that the firm was
experiencing a sales upswing at the time of its shutdown."

JAIME PABALAN AND EDUARDO LAGDAMEO vs. NATIONAL LABOR RELATIONS

COMMISSION, LABOR ARBITER AMBROSIO B. SISON, ELIZABETH RODEROS, ET. AL. AND
THE SHERIFF OF THE NATIONAL LABOR RELATIONS COMMISSION
G.R. No. 89879. April 20, 2000
Gancayco, J.
FACTS:
Eighty-four (84) workers of the Philippine Inter-Fashion, Inc. (PIF) filed a complaint against the latter for illegal
transfer simultaneous with illegal dismissal without justifiable cause. They demanded reinstatement with full
backwages, living allowance, 13th month pay and other benefits under existing laws and/or separation pay.
PIF, through its General-Manager received the summons. The hearings were re-set several times due to the failure
of either party to appear on each of the dates set.
A decision was rendered by the labor arbiter ordering PIF and its officers Mr. Jaime Pabalan and Mr. Eduardo
Lagdameo to reinstate 62 of the dismissed employees and to pay jointly and severally their backwages and other
benefits from the time they were dismissed up to the time they are actually reinstated, the computation to be based
from the latest minimum wage law at the time of their dismissal. The NLRC affirmed the decision of the Labor
Arbiter.
ISSUE: Did the Arbiter and NLRC commit grave abuse of discretion in adjudging Pabalan and Lagdameo
jointly and severally liable with PIF to pay the judgment debt?

HELD:
YES. Complainants did not allege or show that petitioners, as officers of the corporation deliberately and
maliciously designed to evade the financial obligation of the corporation to its employees, or used the transfer of
the employees as a means to perpetrate an illegal act or as a vehicle for the evasion of existing obligations, the
circumvention of statutes, or to confuse the legitimate issues.
Indeed, in the questioned resolution of the NLRC, there is no finding as to why petitioners were being held jointly
and severally liable for the liability and obligation of the corporation except as to invocation of the ruling of this
Court in A.C. Ransom Labor Union-CCLU vs. NLRC in that the liability in the cases of illegal termination of
employees extends not only to the corporation as a corporate entity but also to its responsible officers acting in
the interest of the corporation or employer.
It must be noted, however, that in A.C. Ransom Labor Union-CCLU vs. NLRC, the corporation was a family
corporation and that during the strike the members of the family organized another corporation which was the
Rosario Industrial Corporation to which all the assets of the A.C. Ransom Corporation were transferred to
continue its business which acts of such officers and agents of A.C. Ransom Corporation were intended to avoid
payment of its obligations to its employees. In such case, this Court considered the president of the corporation
to be personally liable together with the corporation for the satisfaction of the claim of the employees.
Not one of the above circumstances was shown to be present. Hence petitioners cannot be held jointly and
severally liable with the PIF corporation under the questioned decision and resolution of the public respondent.
M. MC CONNEL, W. P. COCHRANE, RICARDO RODRIGUEZ, ET AL. vs. CA
G.R. No. L-10510; March 17, 1961
Reyes, J.B.L., J.

Facts:Park Rite Co., Inc., a Philippine corporation, was originally organized on or about April 15, 1947, with a
capital stock of 1,500 shares at P1.00 a share. The corporation leased from Rafael Perez Rosales y Samanillo a
vacant lot on Juan Luna street (Manila) which it used for parking motor vehicles for a consideration. It turned out
that in operating its parking business, the corporation occupied and used not only the Samanillo lot it had leased
but also an adjacent lot belonging to the respondents-appellees Padilla, without the owners' knowledge and
consent. When the latter discovered the truth around October of 1947, they demanded payment for the use and
occupation of the lot. The corporation (then controlled by petitioners Cirilo Parades and Ursula Tolentino, who
had purchased and held 1,496 of its 1,500 shares) denied liability, blaming the original incorporators, McConnel,
Rodriguez and Cochrane. Consequently, the lot owners, Dominga de los Reyes and Sabino Padilla, filed against
it a complaint for forcible entry in the Municipal Court of Manila. Judgment was rendered in favor of the
respondent.

The judgment creditors then filed suit in the Court of First Instance of Manila against the corporation and its past
and present stockholders, to recover from them, jointly and severally, the unsatisfied balance of the judgment,
plus legal interest and costs. The CFI denied the claim. On appeal, the Court of appeals reversed finding that the
corporation was a mere alter ego or business conduit of the principal stockholders that controlled it for their own
benefit, and adjudged them responsible for the amounts demanded by the lot owners. Cirilo Paredes and Ursula
Tolentino then resorted to this court.

Issue: Whether or not the individual stockholders may be held liable for obligations contracted by the
corporation.

Held: YES. Particularly in cases wherever circumstances have shown that the corporate entity is being used as an
alter ego or business conduit for the sole benefit of the stockholders, or else to defeat public convenience, justify
wrong, protect fraud, or defend crime.

The corporation was a mere extension of their personality is shown by the fact that the office of Cirilo Paredes
and that of Park Rite Co., Inc. were located in the same building, in the same floor and in the same room — at
507 Wilson Building. This is further shown by the fact that the funds of the corporation were kept by Cirilo
Paredes in his own name The corporation itself had no visible assets, as correctly found by the trial court, except
perhaps the toll house, the wire fence around the lot and the signs thereon. It was for this reason that the judgment
against it could not be fully satisfied.

The facts conclusively show that the corporation is a mere instrumentality of the individual stockholders, hence
the latter must individually answer for the corporate obligations. While the mere ownership of all or nearly all
of the capital stock of a corporation is a mere business conduit of the stockholder, that conclusion is amply
justified where it is shown, as in the case before us, that the operations of the corporation were so merged with
those of the stockholders as to be practically indistinguishable from them. To hold the latter liable for the
corporation's obligations is not to ignore the corporation's separate entity, but merely to apply the established
principle that such entity cannot be invoked or used for purposes that could not have been intended by the law
that created that separate personality.
TAN BOON BEE & CO., INC. vs. THE HONORABLE HILARION U. JARENCIO, PRESIDING JUDGE
OF BRANCH XVIII of the Court of First Instance of Manila, GRAPHIC PUBLISHING, INC., and
PHILIPPINE AMERICAN CAN DRUG COMPANY
G.R. No. L-41337; June 30, 1988
Paras, J.

Facts: Petitioner herein, doing business under the name and style of Anchor Supply Co., sold on credit to herein
private respondent Graphic Publishing, Inc. (GRAPHIC for short) paper products amounting to P55,214.73.
GRAPHIC made partial payment by check to petitioner in the total amount of P24,848.74; and on December 21,
1972, a promissory note was executed to cover the balance of P30,365.99. In the said promissory note, it was
stipulated that the amount will be paid on monthly installments and that failure to pay any installment would make
the amount immediately demandable with an interest of 12% per annum. Later on, for failure of GRAPHIC to
pay any installment, petitioner filed CFI-Manila presided over by herein respondent judge, a complaint for a Sum
of Money. The trial court ordered GRAPHIC to pay the petitioner 1973 until fully paid, plus the costs of suit. An
Alias writ was issued.
Pursuant to the said issued alias writ of execution, the executing sheriff levied upon one (1) unit printing
machine Identified as "Original Heidelberg Cylinder Press" Type H 222, NR 78048, found in the premises of
GRAPHIC. But in a letter dated July 19, 1974, private respondent, Philippine American Drug Company (PADCO
for short) had informed the sheriff that the printing machine is its property and not that of GRAPHIC, and
accordingly, advised the sheriff to cease and desist from carrying out the scheduled auction sale on July 26, 1974.
This notwithstanding, the sheriff proceeded with the scheduled auction sale, sold the property to the petitioner, it
being the highest bidder, and issued a Certificate of Sale in favor of petitioner. PADCO filed an "Affidavit of
Third Party Claim" with the Office of the City Sheriff. Thereafter, on July 30,1974, PADCO filed with CFI-
Manila, a Motion to Nullify Sale on Execution (With Injunction). Respondent judge, in an Order dated March 26,
1975, ruled in favor of PADCO. The motion for reconsideration being denied, petitioner filed the instant petition
contending that the respondent judge committed grave abuse of discretion or acted without jurisdiction in not
piercing the corporate veil of PADCO.

Issue: Did the respondent judge gravely abused his discretion when he refused to pierce PADCO’s identity.

Held: Yes. It is true that a corporation, upon coming into being, is invested by law with a personality separate and
distinct from that of the persons composing it as well as from any other legal entity to which it may be related.
However, this separate and distinct personality is merely a fiction created by law for convenience and to promote
justice. Accordingly, this separate personality of the corporation may be disregarded, or the veil of corporate
fiction pierced, in cases where it is used as a cloak or cover for fraud or illegality, or to work an injustice, or where
necessary to achieve equity or when necessary for the protection of creditors.
In the instant case, petitioner's evidence established that PADCO was never engaged in the printing
business; that the board of directors and the officers of GRAPHIC and PADCO were the same; and that PADCO
holds 50% share of stock of GRAPHIC. Petitioner likewise stressed that PADCO's own evidence shows that the
printing machine in question had been in the premises of GRAPHIC since May, 1965, long before PADCO even
acquired its alleged title on July 11, 1966 from Capitol Publishing. That the said machine was allegedly leased
by PADCO to GRAPHIC on January 24, 1966, even before PADCO purchased it from Capital Publishing on July
11, 1966, only serves to show that PADCO's claim of ownership over the printing machine is not only farce and
sham but also unbelievable.
ERNESTO CEASE, ET. AL. vs. HON. COURT OF APPEALS
G.R. No. L-33172; October 18, 1979
GUERRERO, J. Commented [JM2]: Fixed the first digest, ito na lang
gawin mong basis for other digests.
FACTS: Sometime in June 1908, Forrest L. Cease together with five other American citizens organized the
No indention, tsaka rephrase mo yung mga whether or not.
Tiaong Milling and Plantation Company and in the course of its corporate existence the company acquired various Bad English yun.
properties but at the same time all the other original incorporators were bought out by Forrest together with his
children namely Ernest, Cecilia, Teresita, Benjamin, Florence and one Bonifacia Tirante also considered a
member of the family. In June 1958, the charter of the company lapsed but the records are silent as to steps to
liquidate it. Later on, Forrest died. Thereafter, Benjamin and Florence wanted an actual division while the other
children wanted reincorporation. The latter children Ernesto, Teresita and Cecilia and aforementioned other
stockholder Bonifacia Tirante proceeded to incorporate themselves into the F.L. Cease Plantation Company and
registered it with SEC on 9 December, 1959. As for Benjamin and Florence, they initiated for the settlement of
the estate, and one month afterwards, they filed a civil case against herein respondents asking that the Tiaong
Milling and Plantation Corporation be declared Identical to F.L. Cease and that its properties be divided among
his children as his intestate heirs.

During the pendency of the civil Case, apparently on the eve of the expiry of the three year period provided by
the law for the liquidation of corporations, the board of liquidators of Tiaong Milling executed an assignment and
conveyance of properties and trust agreement in favor of F.L. Cease Plantation Co. Inc. as trustee of the Tiaong
Milling and Plantation Co. The trial Judge held for Benjamin and Florence, declaring that the assets or properties
of the defunct Tiaong Milling and Plantation Company now appearing under the name of F.L. Cease Plantation
Company as Trustee, form part of the estate also of the deceased Forrest L. Cease and ordered divided, share and
share alike, among his six children the plaintiffs and the defendants in accordance with Rule 69, Rules of Court.

ISSUE: Can corporate personality of F.L. Plantation Company be pierced and be treated as one and the
same with the defunct Tiaong Milling and Plantation Company, Inc., whose assets and property constitute
the estate of deceased Cease?

HELD: Yes, the business of the corporation is largely, if not wholly, the personal venture of Forrest L. Cease.
For Tiaong Milling and Plantation Company shall have been able to extend its corporate existence beyond the
period of its charter which lapsed in June, 1958 under the guise and cover of F. L, Cease Plantation Company,
Inc. as Trustee which would be against the law, and as Trustee shall have been able to use the assets and properties
for the benefit of the petitioners, to the great prejudice and defraudation. of private respondents. Hence, it becomes
necessary and imperative to pierce that corporate veil

Generally, a corporation may not be made to answer for acts or liabilities of its stockholders or those of the legal
entities to which it may be connected, and vice versa. This is by virtue of its separate and distinct personality.
However, such personality is merely a fiction created by law for convenience and to promote the ends of justice.
For this reason, it may not be used to defeat public convenience, justify wrong, protect fraud, defend crime,
confuse legitimate legal or judicial issues, perpetrate deception or otherwise circumvent the law. It cannot also be
used alter ego, adjunct, or business conduit for the sole benefit of the stockholders or of another corporate entity.
Otherwise, the notion of corporate entity will be pierced or disregarded, and the corporation will be treated merely
as an association of persons. Thus, the assets or properties of the defunct company are also the estate of the
deceased proprietor.
Francisco Del Rosario vs. National Labor Relations Commission and Leonardo Atienza
G.R. No. 85416, July 24, 1990
Cortes, J.

Facts: Private respondent Atienza filed a complaint for money claims before the Philippine Overseas Employment
Agency (POEA) against Philsa Construction and Trading Co. Inc. (the recruiter) and Arieb Enterprises (the
foreign employer). The POEA dismissed the complaint for lack of merit but such was reversed by respondent
National Labor Relations Commission (NLRC).

A writ of execution was issued by the POEA but it was returned unsatisfied as Philsa was no longer operating
and was financially incapable of satisfying the judgment. Private respondent moved for the issuance of an alias
writ against the officers of Philsa. This motion was opposed by the officers, led by petitioner, Francisco Del
Rosario, the president and general manager of the corporation. The POEA ordered that the execution against the
properties of Mr. Francisco Del Rosario and if insufficient, against the cash and or surety bond of the bonding
company concerned for the full satisfaction of the judgment awarded.

The NLRC affirmed the issuance of the execution against petitioner, on the theory that the corporate personality
of Philsa should be disregarded. It was primarily founded on Philsa’s findings wherein it appears that another
corporation, Philsa International Placement & Services Corp., composed practically of the same set of
incorporators/stockholders, was registered as a licensed private employment agency whose license was issued on
November 5, 1981, represented by the same Mr. Francisco del Rosario as its President/General Manager. The
NLRC applied the ruling in A.C. Ransom Labor Union-CCLU vs NLRC.

Issue: Whether or not the veil of the corporate fiction of Philsa Construction and Trading Co. Inc. should
be pierced.

Held: No. An intent to evade payment of his claims cannot be implied from the expiration of Philsa’s license and
its delisting. Neither will the organization of Philsa International Placement and Services Corp. and its registration
with the POEA as a private employment agency imply fraud since it was organized and registered in 1981, several
year before private respondent filed his complaint before the POEA in 1985. The creation of the second
corporation could not therefore have been in anticipation of private respondent’s money claims and the
consequent adverse judgment against Philsa. Likewise, substantial identity of the incorporators of the two
corporations does not necessarily imply fraud. In order for the separate juridical personality of a corporation to
be disregarded, the wrongdoing must be clearly and convincingly established. It cannot be presumed.
PNB vs Ritratto Group Inc.
G.R. No. 142616; July 31, 2001
Kapunan, J.

Facts: 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. 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 25, 1999, respondents filed a complaint for injunction before the Regional Trial Court of Makati. At the
hearing, petitioner filed a motion to dismiss on the grounds of failure to state a cause of action and the absence of
any privity between the petitioner and respondents. A writ of preliminary injunction was correspondingly issued
and 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 which dismissed the petition.

Issue: WON the CA erred in not dismissing the complaint considering that by the allegations of the
complaint, no cause of action exists against petitioner, which is not a real party in interest being a mere
attorney-in-fact authorized to enforce an ancillary contract.

Held: YES. Respondents argue that even assuming arguendo that petitioner and PNB-IFL are two separate
entities, petitioner is still the party-in-interest in the application for preliminary injunction because it is tasked to
commit acts of foreclosing respondents' properties. In addition, respondents justified the act of the court a quo in
applying the doctrine of "Piercing the Veil of Corporate Identity" by stating that petitioner is merely an alter ego
or a business conduit of PNB-IFL.
The contract questioned is one entered into between respondent and PNB-IFL, not PNB. Clearly, petitioner not
being a part to the contract has no power to re-compute the interest rates set forth in the contract. Respondents,
therefore, do not have any cause of action against petitioner. 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. 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.
Yu v. National Labor Relations Commission
G.R. Nos. 111810-11; June 16, 1995
Melo, J.

Facts:
Private respondents, employees of respondent corporation Tanduay Distillery, Inc, (TDI), received a
memorandum from TDI terminating their services for reasons of retrenchment.
After they had ceased as such employees, a new buyer of TDI's assets, Twin Ace Holdings, Inc. took over
the business. It assumed the business name Tanduay Distillers. Subsequently, an amended complaint was filed by
private respondents against TDI and petitioners Yu and Young doing business under the name and style of
Tanduay Distillers.
The Labor Arbiter declared the retrenchment as illegal and ordered Tanduay Distillers to reinstate the
complainants and pay backwages and in the event of change in management it (Tanduay Distillery, Inc.,) was
ordered to pay the complainants their respective separation benefits. NLRC affirmed LA’s decision.
Yu and Young opposed the employees’ motion for execution on the ground that the issuance of the writ
against Tanduay Distillers is without basis because it is an entity distinct and separate form TDI. Nevertheless,
NLRC issued a writ of execution.

Issues:
Whether or not TDI and Tanduay Distillers are one and the same entity.

Held:
NO. Twin Ace is part of the Allied Bank Group although it conducts the rum business under the name of Tanduay
Distillers. The use of a similar sounding or almost identical name is an obvious device to capitalize on the goodwill
which Tanduay Rum has built over the years.

There is no proof of communality of ownership and management of the two companies. Moreover, the
complaint was filed against TDI. Only later when the manufacture and sale of Tanduay products was taken over
by Twin Ace or Tanduay Distillers were James Yu and Wilson Young impleaded. The corporation itself — Twin
Ace or Tanduay Distillers — was never made a party to the case.

Moreover, TDI as a corporation or its shares of stock were not purchased by Twin Ace. The buyer limited
itself to purchasing most of the assets, equipment, and machinery of TDI.
The fiction of separate and distinct corporate entities cannot, in the instant case, be disregarded and brushed aside,
there being not the least indication that the second corporation is a dummy or serves as a client of the first
corporate entity. In the case at bench, since TDI and Twin Ace or Tanduay Distillers are two separate and distinct
entities, the order for Tanduay Distillers (and petitioners) to reinstate respondents-employees is without legal and
factual basis.