G.R. No.

125986, January 28, 1999

Luxuria Homes Inc., and Aida Posadas

vs Hon. Court of Appeals, James Builder Construction and Jaime Bravo

Facts:

Aida and her 2 minor children co-owned a 1.6 hectare property in Sucat, Muntinlupa which was
occupied by squatters. Aida then contracted Bravo regarding the development of the property and
to negotiate with the squatters. 7 months later, Aida and her children assigned the property to
Luxuria Homes, Bravo was a witness to the execution of the deed of assignment and the articles of
incorporation of Luxuria.

Then in 1992, the relationship between Aida and Bravo turned sour, which resulted to Bravo
demanding payment for services rendered in connection with the development of the land. Aida,
refuses to pay. Thus, James Builder and Bravo initiated a complaint against Aida and Luxuria Homes.

The trial court declared Aida in default and ordered Aida, jointly and in solidum with Luxuria to pay
Bravo. Aggrieved, Aida appealed to the CA. The CA then modified the decision of the trial court and
deleted the award of moral damages on the ground that James Builder is a corporation and hence
could not experience physical suffering and mental anguish.

Issue: Can petitioner Luxuria Homes be held liable to private respondents for the transactions
supposedly entered into between Aida and Bravo?

Ruling:

No. It was Posadas who entered into a contract with Bravo in her personal capacity. Bravo was not
able to prove that Luxuria Homes was a mere conduit of Posadas. Posadas owns just 33% of Luxuria
Homes. Further, when Luxuria Homes was created, Bravo was there as a witness. So how can he
claim that the creation of said corporation was to defraud him. The eventual transfer of Posadas’
property to Luxuria was with the full knowledge of Bravo. The agreement between Posadas and
Bravo was entered into even before Luxuria existed hence Luxuria was never a party thereto.
Whatever liability Posadas incurred arising from said agreement must be borne by her solely and not
in solidum with Luxuria. To disregard the separate juridical personality of a corporation, the
wrongdoing must be clearly and convincingly established. It cannot be presumed.

That the CA committed a reversible error in making Luxuria Homes liable. It cannot be said that the
incorporation of Luxuria Homes and eventual transfer of the subject property to it were in fraud of
private respondent as such were done with full knowledge of Bravo himself.

To disregard the separate juridical personality of a corporation, the wrong doing must be clearly and
convincingly established. It cannot be presumed.
Azcor Mfg. Inc. vs. NLRC, 303 SCRA 26

Facts:

Candido Capulso filed with the LA a complaint for constructive illegal dismissal and illegal deduction
of P50.00 a day for the period of April to September 1989. Azcor and Arturo (who were the
respondents before the LA case and Filipina was not a party in the case yet) moved to dismiss the
complaint on the ground that there was no ER-EE relationship between petitioners and Capulso. He
alleged that he worked for Azcor for more than 2 years. Then, due to asthma, he filed for a leave of
absence. Upon returning to work, he was not permitted to do so. He later on amended his complaint
and impleaded Filipinas Paso as additional respondent. Petitioners allege that Candido was a former
employee of Azcor who resigned on February 28, 1990 as evidenced by a letter of resignation and
joined Filipinas on March 1990 as shown by a contract of employment

LA dismissed the complaint for lack of merit but ordered Azcor to refund to Candido the amount
illegally deducted from his salary. NLRC modified the decision by declaring the dismissal of Candido
as illegal for lack of just and valid cause and ordered to reinstate Candido

The contract of employment with Candido and Filipinas Paso stated that theperiod is for 6 months
which establishes a presumption that the said contract could pass either as to cover the
probationary period, or job contracting—the completion of which automatically terminates the
employment

However, Candido continued working for Filipinas Paso after the lapse of the contract until the
alleged termination of employment of the appellant

The two resignation letters executed by the appellant are EXACTLY WORDED—shows that the same
were prepared by one person plus, Candido denied having executed the same

These clearly show that there was no interruption in the service of the complainant with Azcor from
April 1989 to June 1991 when Candido was unceremoniously dismissed

Azcor Manufacturing Inc, Filipinas Paso, and Arturo Zuluaga instituted this petition for certiorari to
assail the decision of the NLRC which reversed the decision of the LA dismissing the complaint of
respondent Candido Capulso against petitioners

Issue:

WON petitioners (Azcor and Filipinas Paso) could not be held jointly and severally liable to Candido
for backwages since they are separate and distinct corporations with different corporate
personalities.

Held:

No.
The doctrine that a corporation is a legal entity or a person in law distinct from the persons
composing it is merely a legal fiction for purposes of convenience and to subserve the ends of
justice. Where, as in this case, the corporate fiction was used as a means to perpetrate a social
injustice or as a vehicle to evade obligations or confuse legitimate issues, it would be discarded and
the 2 corporations would be merged as one.

In the case at bar, there was much confusion as to the identity of Candido’s employer, but for sure it
was Filipinas Paso and Azcor’s own design. First, Candido had no knowledge that he was already
working under Filipinas Paso since he continued to retain his Azcor ID. Second, his pay slips
contained the name of Azcor giving the impression that the latter was paying his salary. Third, he
was paid the same salary and performed the same job, in the same work area, in the same location,
using the same tools, and under the same supervisor.

In fine, we see in the totality of the evidence show a veiled attempt by petitioners to deprive
Candido of what he had earned through hard labor by taking advantage of his low level education
and confusing him as to who really was his employer a callous and despicable treatment of a worker
who had rendered faithful service to their company

Republic vs. Mega Pacific eSolutions, Inc.; 27 June 2016

FACTS: Republic Act No. 8436 authorized the COMELEC to use an automated election system for the
May 1998 elections. However, the automated system failed to materialize and votes were canvassed
manually during the 1998 and the 2001 elections.

For the 2004 elections, the COMELEC again attempted to implement the automated election system.
For this purpose, it invited bidders to apply for the procurement of supplies, equipment, and
services. Respondent MPEI, as lead company, purportedly formed a joint venture — known as the
Mega Pacific Consortium (MPC) — together with We Solv, SK C & C, ePLDT, Election.com and Oracle.
Subsequently, MPEI, on behalf of MPC, submitted its bid proposal to COMELEC.

The COMELEC evaluated various bid offers and subsequently found MPC and another company
eligible to participate in the next phase of the bidding process. The two companies were referred to
the Department of Science and Technology (DOST) for technical evaluation. After due assessment,
the Bids and Awards Committee (BAC) recommended that the project be awarded to MPC. The
COMELEC favorably acted on the recommendation and issued Resolution No. 6074, which awarded
the automation project to MPC.

Despite the award to MPC, the COMELEC and MPEI executed on 2 June 2003 the Automated
Counting and Canvassing Project Contract (automation contract) for the aggregate amount of
P1,248,949,088. MPEI agreed to supply and deliver 1,991 units of ACMs and such other equipment
and materials necessary for the computerized electoral system in the 2004 elections. Pursuant to the
automation contract, MPEI delivered 1,991 ACMs to the COMELEC. The latter, for its part, made
partial payments to MPEI in the aggregate amount of P1.05 billion.
The full implementation of the automation contract was rendered impossible by the fact that, after a
painstaking legal battle, this Court in its 2004 Decision declared the contract null and void. We held
that the COMELEC committed a clear violation of law and jurisprudence, as well as a reckless
disregard of its own bidding rules and procedure. In addition, the COMELEC entered into the
contract with inexplicable haste, and without adequately checking and observing mandatory
financial, technical, and legal requirements.

ISSUE: WON THE APPLICATION OF PIERCING THE VEIL OF CORPORATE ENTITY IS PROPER.

HELD: YES. Veil-piercing in fraud cases requires that the legal fiction of separate juridical personality
is used for fraudulent or wrongful ends. For reasons discussed below, We see red flags of fraudulent
schemes in public procurement, all of which were established in the 2004 Decision, the totality of
which strongly indicate that MPEI was a sham corporation formed merely for the purpose of
perpetrating a fraudulent scheme.

The red flags are as follows: (1) overly narrow specifications; (2) unjustified recommendations and
unjustified winning bidders; (3) failure to meet the terms of the contract; and (4) shell or fictitious
company. We shall discuss each in detail.

Fraud on the part of respondent MPEI was sufficiently established by the factual findings of this
Court in its 2004 Decision and subsequent pronouncements. A writ of preliminary attachment may
issue over the properties of the individual respondents using the doctrine of piercing the corporate
veil

The totality of the red flags found in this case leads Us to the inevitable conclusion that MPEI was
nothing but a sham corporation formed for the purpose of defrauding petitioner. Its ultimate
objective was to secure the P1,248,949,088 automation contract.

The scheme was to put up a corporation that would participate in the bid and enter into a contract
with the COMELEC, even if the former was not qualified or authorized to do so.

Without the incorporation of MPEI, the defraudation of the government would not have been
possible. The formation of MPEI paved the way for its participation in the bid, through its claim that
it was an agent of a supposed joint venture, its misrepresentations to secure the automation
contract, its misrepresentation at the time of the execution of the contract, its delivery of the
defective ACMs, and ultimately its acceptance of the benefits under the automation contract.

Further, because all the individual respondents actively participated in the perpetration of the fraud
against petitioner, their personal assets may be subject to a writ of preliminary attachment by
piercing the corporate veil.

A corporation's privilege of being treated as an entity distinct and separate from the stockholders is
confined to legitimate uses, and is subject to equitable limitations to prevent its being exercised for
fraudulent, unfair, or illegal purposes.
The main effect of disregarding the corporate fiction is that stockholders will be held personally
liable for the acts and contracts of the corporation, whose existence, at least for the purpose of the
particular situation involved, is ignored, the  law will regard the corporation as an association of
persons.115 Thus, considering that We find it justified to pierce the corporate veil in the case before
Us, MPEI must, perforce, be treated as a mere association of persons whose assets are unshielded
by corporate fiction. Such persons' individual liability shall now be determined with respect to the
matter at hand.

Violago vs. BA Finance Corporation,

FACTS:

Avelino Violago, President of Violago Motor Sales Corporation (VMSC), offered to sell a car to his
cousin, Pedro F. Violago, and the latters wife, Florencia. Avelino explained that he needed to sell a
vehicle to increase the sales quota of VMSC, and that the spouses would just have to pay a down
payment while the balance would be financed by respondent BA Finance.

Subsequently the spouses and Avelino signed a promissory note under which they bound
themselves to pay jointly and severally to the order of VMSC in 36 monthly installments

The spouses were unaware that the same car had already been sold in 1982 to Esmeraldo Violago,
another cousin of Avelino, and registered in Esmeraldos name by the LTO-San Rafael Branch. Despite
the spouses demand for the car and Avelinos repeated assurances, there was no delivery of the
vehicle. Since VMSC failed to deliver the car, Pedro did not pay any monthly amortization to BA
Finance.

BA Finance filed with the Regional Trial Court a complaint for Replevin with Damages against the
spouses and prayed for the delivery of the vehicle in favor of BA Finance or, if delivery cannot be
effected, for the payment 1 plus penalty at the rate of 3% per month until the same is fully paid.

SP. On May 31, 1991, the CA nullified the RTCs order. This CA decision became final and executory. 

The RTC rendered a Decision, finding for BA Finance but against the Violago spouses.

The RTC, however, declared that they are entitled to be indemnified by Avelino. Petitioners-spouses
and Avelino appealed to the CA. The appellate court ruled that the promissory note was a negotiable
instrument and that BA Finance was a holder in due course, applying Secs. 8, 24, and 52 of the NIL.
The spouses Violago sought but were denied reconsideration by the CA per its Resolution of May 15,
2003.

Issue:

WHETHER OR NOT THE VEIL OF CORPORATE ENTITY MAY BE INVOKED AND SUSTAINED DESPITE THE
FRAUD AND DECEPTION OF AVELINO.

Held:

No.

The test in determining the applicability of the doctrine of piercing the veil of corporate fiction is
as follows:

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
acts in contravention of plaintiffs legal rights; and

3. The aforesaid control and breach of duty must proximately cause the injury or unjust
loss complained of.

VMSC is a family-owned corporation of which Avelino was president. Avelino committed fraud in
selling the vehicle to petitioners, a vehicle that was previously sold to Avelinos other cousin,
Esmeraldo. Nowhere in the pleadings did Avelino refute the fact that the vehicle in this case was
already previously sold to Esmeraldo; he merely insisted that he cannot be held liable because he
was not a party to the transaction. The fact that Avelino and Pedro are cousins, and that Avelino
claimed to have a need to increase the sales quota, was likely among the factors which motivated
the spouses to buy the car. Avelino, knowing fully well that the vehicle was already sold, and with
abuse of his relationship with the spouses, still proceeded with the sale and collected the down
payment from petitioners.

The trial court found that the vehicle was not delivered to the spouses. Avelino clearly defrauded
petitioners. His actions were the proximate cause of petitioners loss. He cannot now hide behind the
separate corporate personality of VMSC to escape from liability for the amount adjudged by the trial
court in favor of petitioners.
In short, even if We are to assume arguendo that the obligation was incurred in the name of the
corporation, the petitioner [Arcilla] would still be personally liable therefor because for all legal
intents and purposes, he and the corporation are one and the same. The fiction of separate
juridical personality conferred upon such corporation by law should be disregarded.
Prince Transport, Inc. vs. Garcia

FACTS:

Respondents were hired either as drivers, conductors, mechanics or inspectors, except for
respondent Diosdado Garcia (Garcia), who was assigned as Operations Manager. In addition to their
regular monthly income, respondents also received commissions. Sometime in October 1997, the
said commissions were reduced to 7 to 9% this led respondents and other employees of PTI to hold a
series of meetings to discuss the protection of their interests as employees these meetings led
petitioner Renato Claros, who is the president of PTI, to suspect that respondents are about to form
a union in order to block the continued formation of the union, PTI caused the transfer of all union
members and sympathizers to one of its sub-companies, Lubas Transport (Lubas)

Petitioners, on the other hand, denied the material allegations of the complaints contending that
herein respondents were no longer their employees, since they all transferred to Lubas at their own
request; petitioners have nothing to do with the management and operations of Lubas as well as the
control and supervision of the latter's employees;

Subsequently, the complaints filed by respondents were consolidated. The Labor Arbiter ruled that
petitioners are not guilty of unfair labor practice. Respondents filed a Partial Appeal with the NLRC.
NLRC modified the decision of the labor arbiter. Respondents filed a Motion for Reconsideration, but
the NLRC denied it in its Resolution. Respondents then filed a special civil action for certiorari with
the CA assailing the Decision and Resolution of the NLRC. The CA rendered the herein assailed
Decision which granted respondents' petition. The CA ruled that petitioners are guilty of unfair labor
practice; that Lubas is a mere instrumentality, agent conduit or adjunct of PTI. Petitioners filed a
Motion for Reconsideration, but the CA denied it via its Resolution. Hence, the instant petition for
review on certiorari.

ISSUE : WON THE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT PETITIONERS PRINCE
TRANSPORT, INC. AND MR. RENATO CLAROS AND LUBAS TRANSPORT ARE ONE AND THE SAME
CORPORATION AND THUS, LIABLE IN SOLIDUM TO RESPONDENTS

Held:

No.  The Court agrees with the CA that Lubas is a mere agent, conduit or adjunct of PTI. A settled
formulation of the doctrine of piercing the corporate veil is that when two business enterprises are
owned, conducted and controlled by the same parties, both law and equity will, when necessary to
protect the rights of third parties, disregard the legal fiction that these two entities are distinct and
treat them as identical or as one and the same.26cralaw In the present case, it may be true that
Lubas is a single proprietorship and not a corporation. However, petitioners' attempt to isolate
themselves from and hide behind the supposed separate and distinct personality of Lubas so as to
evade their liabilities is precisely what the classical doctrine of piercing the veil of corporate entity
seeks to prevent and remedy.

As correctly pointed out by petitioners, if Lubas were truly a separate entity, how come that it was
Prince Transport who made the decision to transfer its employees to the former? Besides, Prince
Transport never regarded Lubas Transport as a separate entity. In the aforesaid letter, it referred to
said entity as "Lubas operations." Moreover, in said letter, it did not transfer the employees; it
"assigned" them. Lastly, the existing funds and 201 file of the employees were turned over not to a
new company but a "new management."

The Court also agrees with respondents that if Lubas is indeed an entity separate and independent
from PTI why is it that the latter decides which employees shall work in the former?

Moreover, petitioners failed to refute the contention of respondents that despite the latter's
transfer to Lubas of their daily time records, reports, daily income remittances of conductors,
schedule of drivers and conductors were all made, performed, filed and kept at the office of PTI. In
fact, respondents' identification cards bear the name of PTI.

It may not be amiss to point out at this juncture that in two separate illegal dismissal cases involving
different groups of employees transferred by PTI to other companies, the Labor Arbiter handling the
cases found that these companies and PTI are one and the same entity; thus, making them solidarily
liable for the payment of backwages and other money claims awarded to the complainants therein.

Guillermo v. Uson, G.R. No. 198967

Facts:

Respondent Uson was an accounting supervisor in Royal Class Venture Phils., Inc. (RCVPI) until Dec.
20, 2000 when he was allegedly dismissed by petitioner Guillermo, the company’s president/general
manager, for having exposed the latter’s practice of dictating and undervaluing the shares of stocks
of the corporation. Thereafter he filed a complaint for illegal dismissal against the corporation,
RCVPI.

The Labor Arbiter rendered a decision in favor of Uson, ordering respondent to reinstate him to his
former position and pay his backwages, 13th month pay as well as moral damages, exemplary
damages and attorney’s fees. RCVPI did not file an appeal but repeated issuances of Writs of
Execution against the same remained unsatisfied.
Uson filed another Motion for Alias Writ of Execution and to Hold Directors and Officers of
Respondent Liable for the Decision and quoted from the sheriff’s return: a) that at RCVPI’s address
(to which the writs are being served) there is a new establishment named “ Joel and Sons
Corporation” which was a family corporation owned by the Guillermos, in which Jose Emmanuel
Guillermo, the President and General Manager of RCVPI, is one of the stockholders; b) that Jose
received the writ using the nickname “Joey” concealing his real identity and pretended to be the
brother of Jose; c) that RCVPI has already been dissolved.

Labor Arbiter granted the motion filed by respondent and held herein petitioner Jose Emmanuel
Guillermo, in his personal capacity jointly and severally liable with the corporation stating that the
officers of the corporation are jointly and severally liable for the obligations of the corporation
(“piercing the veil of corporate fiction”) to the employees even if the said officers were not parties to
the case.

Guillermo filed a Motion for Reconsideration/To Set Aside the Order of the labor arbiter. His
contentions were a) officers cannot be included as judgement obligor in a labor case for the first
time only after the decision of the Labor Arbiter had become final and executory b) in piercing the
veil of RCVPI, he was allegedly discriminated against when he alone was belatedly impleaded despite
the existence of other officers of RCVPI; c)that the labor arbiter has no jurisdiction because the case
is one of an intra-corporate controversy, with the complainant Uson also claiming to be a
stockholder and director of the corporation.

ISSUE : WON the piercing the veil of corporate fiction proper in the case

HELD:

Yes. The veil of corporate fiction can be pierced, and responsible corporate directors and officers or
even a separate but related corporation, may be impleaded and held answerable solidarily in a labor
case, even after final judgment and on execution, so long as it is established that such persons have
deliberately used the corporate vehicle to unjustly evade the judgment obligation, or have resorted
to fraud, bad faith or malice in doing so. 

A finding of personal and solidary liability against a corporate officer like Guillermo must be rooted
on a satisfactory showing of fraud, bad faith or malice, or the presence of any of the justifications for
disregarding the corporate fiction. 
It is our finding that such evidence exists in the record. In the case at bar involves an apparent family
corporation. As in those two cases, the records of the present case bear allegations and evidence
that Guillermo, the officer being held liable, is the person responsible in the actual running of the
company and for the malicious and illegal dismissal of the complainant; he, likewise, was shown to
have a role in dissolving the original obligor company in an obvious "scheme to avoid liability" which
jurisprudence has always looked upon with a suspicious eye in order to protect the rights of labor.

Then, it is also clearly reflected in the records that it was Guillermo himself, as President and General
Manager of the company, who received the summons to the case, and who also subsequently and
without justifiable cause refused to receive all notices and orders of the Labor Arbiter that followed.
Finally, the records likewise bear that Guillermo dissolved Royal Class Venture and helped
incorporate a new firm, located in the same address as the former, wherein he is again a
stockl1older. The foregoing clearly indicate a pattern or scheme to avoid the obligations to Uson and
frustrate the execution of the judgment award, which this Court, in the interest of justice, will not
countenance.

Eric Godfrey Stanley Livesey vs. Binswanger Philippines, Inc. G.R. No. 177493

Facts: 

Petitioner Eric Godfrey Stanley Livesey filed a complaint for illegal dismissal with money claims
against CBB Philippines Strategic Property Services, Inc. (CBB) and Paul Dwyer. CBB was a domestic
corporation engaged in real estate brokerage and Dwyer was its President.

Thereafter, the parties entered into a compromise agreement which LA Reyno approved in an order
dated November 6, 2002. Under the agreement, Livesey was to receive US$31,000.00 in full
satisfaction of LA Reyno’s decision, broken down into US$13,000.00 to be paid by CBB to Livesey or
his authorized representative upon the signing of the agreement; US$9,000.00 on or before June 30,
2003; and US$9,000.00 on or before September 30, 2003.

Further, the agreement provided that unless and until the agreement is fully satisfied, CBB shall not:
(1) sell, alienate, or otherwise dispose of all or substantially all of its assets or business; (2) suspend,
discontinue, or cease its entire, or a substantial portion of its business operations; (3) substantially
change the nature of its business; and (4) declare bankruptcy or insolvency.

CBB paid Livesey the initial amount of US$13,000.00, but not the next two installments as the
company ceased operations. In reaction, Livesey moved for the issuance of a writ of execution. LA
Eduardo G. Magno granted the writ, but it was not enforced. Livesey then filed a motion for the
issuance of an alias writ of execution, alleging that in the process of serving respondents the writ, he
learned “that respondents, in a clear and willful attempt to avoid their liabilities to complainant . . .
have organized another corporation, [Binswanger] Philippines, Inc.” He claimed that there was
evidence showing that CBB and Binswanger Philippines, Inc. (Binswanger) are one and the same
corporation, pointing out that CBB stands for Chesterton Blumenauer Binswanger. Invoking the
doctrine of piercing the veil of corporate fiction, Livesey prayed that an alias writ of execution be
issued against respondents Binswanger and Keith Elliot, CBB’s former President, and now
Binswanger’s President and Chief Executive Officer (CEO).
Issue: Whether or not the doctrine of piercing the corporate veil may be applied.

Held: Yes.

It has long been settled that the law vests a corporation with a personality distinct and separate
from its stockholders or members. In the same vein, a corporation, by legal fiction and convenience,
is an entity shielded by a protective mantle and imbued by law with a character alien to the persons
comprising it. 43 Nonetheless, the shield is not at all times impenetrable and cannot be extended to
a point beyond its reason and policy. Circumstances might deny a claim for corporate personality,
under the “doctrine of piercing the veil of corporate fiction.”

Piercing the veil of corporate fiction is an equitable doctrine developed to address situations where
the separate corporate personality of a corporation is abused or used for wrongful purposes. Under
the doctrine, the corporate existence may be disregarded where the entity is formed or used for
non-legitimate purposes, such as to evade a just and due obligation, or to justify a wrong, to shield
or perpetrate fraud or to carry out similar or inequitable considerations, other unjustifiable aims or
intentions, in which case, the fiction will be disregarded and the individuals composing it and the
two corporations will be treated as identical.

In the present case, we see an indubitable link between CBB’s closure and Binswanger’s
incorporation. CBB ceased to exist only in name; it re-emerged in the person of Binswanger for an
urgent purpose — to avoid payment by CBB of the last two installments of its monetary obligation to
Livesey, as well as its other financial liabilities. Freed of CBB’s liabilities, especially that owing to
Livesey, Binswanger can continue, as it did continue, CBB’s real estate brokerage business.

De Leon vs. NLRC, 358 SCRA 275

Facts:

Petitioner De Leon was employed by respondent company La Tondeña as maintenance man whose
work consisted mainly of painting company building and equipment, and other odd jobs relating to
maintenance. After having worked for respondent for more than a year, petitioner requested that he
be included in the payroll of regular employees, to which the former responded by dismissing
petitioner from his employment. Petitioner having been refused reinstatement filed a complaint
before the Labor Arbiter.

Petitioner asserts that he is a regular employee performing similar functions as of a regular

maintenance and was rehired by respondent company’s labor agency to perform the same tasks.
Respondent company meanwhile claims petitioner was a casual worker hired only to paint a certain
building in the premises and that his work as painter terminated upon completion of the job. The
Labor Arbiter ruled in favor of petitioner and found respondents liable for the charges. Rejecting
respondents argument that there was no employer-employee relationship between FTC and
petitioners, he ruled that FISI and FTC should be considered as a single employer. He observed that
the two corporations have common stockholders and they share the same business address. 

The NLRC reversed the decision of the Labor Arbitor it held that  the principle of "single employer"

Issue:
WON the doctrine of piercing the corporate veil may be applied.

Held:

Yes.

The SC ruled that it find that the Labor Arbiter correctly applied the doctrine of piercing the
corporate veil to hold all respondents liable for unfair labor practice and illegal termination of
petitioners' employment. It is a fundamental principle in corporation law that a corporation is an
entity separate and distinct from its stockholders and from other corporations to which it is
connected. However, when the concept of separate legal entity is used to defeat public
convenience, justify wrong, protect fraud or defend crime, the law will regard the corporation as an
association of persons, or in case of two corporations, merge them into one.

The separate juridical personality of a corporation may also be disregarded when such corporation is
a mere alter ego or business conduit of another person.  In the case at bar, it was shown that FISI
was a mere adjunct of FTC. FISI, by virtue of a contract for security services, provided FTC with
security guards to safeguard its premises. However, records show that FISI and FTC have the same
owners and business address, and FISI provided security services only to FTC and other companies
belonging to the Lucio Tan group of companies. The purported sale of the shares of the former
stockholders to a new set of stockholders who changed the name of the corporation to Magnum
Integrated Services, Inc. appears to be part of a scheme to terminate the services of FISI's security
guards posted at the premises of FTC and bust their newly-organized union which was then
beginning to become active in demanding the company's compliance with Labor Standards laws.
Under these circumstances, the Court cannot allow FTC to use its separate corporate personality to
shield itself from liability for illegal acts committed against its employees.

ROVELS ENTERPRISE, Inc. vs OCAMPO

FACTS:

Rovels is a domestic corporation engaged in construction work wherein Tagaytay Taal Tourist
Development Corporation (TTTDC) was among its client.

In payment for the services rendered by Rovels, the Board of Directors of TTTDC passed a Resolution
on December 29, 1975 providing as follows:

RESOLVED, as it is hereby resolved that payment for professional fees and services rendered by x x x
Rovels Enterprises x x x be made in cash if funds are available, or its equivalent number of shares of
stock of the corporation at par value, and should said creditors elect the latter mode of payment, it
is further resolved that the President and/or his Secretary be authorized as they are hereby
authorized, to issue the corresponding unissued shares of stock of the corporation.
 Resolution was signed by three of TTTDCs directors, but the signatures of the other two (2) TTTDC
directors Jose Silva, Jr. and Emmanuel Ocampo do not appear in the subject Resolution despite their
presence in the December 29, 1975 Board meeting.

On March 1, 1976, the TTTDC Board of Directors passed another Resolution repealing its Resolution
of December 29, 1975, thus:

RESOLVED, as it is hereby resolved, that the Resolution of December 29, 1975 authorizing the
payment of creditors with unissued shares of the corporation be as it is hereby repealed: Resolved
further that the matter as well as the amount of the creditors claims be given adequate study and
consideration by the Board.

TTTDC Directors Jose Silva, Jr. and Emmanuel Ocampo filed a complaint with the SEC against Roberto
Roxas, TTTDC President, and Eduardo Santos, Rovels President allegeing that there was no meeting
of the TTTDCs Board of Directors on December 29, 1975;

a.) that they did not authorize the transfer of TTTDCs shares of stock to Rovels;
b.) that they never signed the alleged minutes of the meeting; and that the signatures of the other two
(2) Directors, Victoriano Leviste and Bienvenido Cruz, Jr.
c.) that of TTTDCs Secretary Francisco Carreon, Jr., were obtained through fraud and
misrepresentation; and
d.) that the TTTDC Board Resolution dated December 29, 1975 was repealed by the March 1, 1976
Resolution. They thus prayed that the transfer of TTTDCs shares of stock to Rovels pursuant to
Resolution dated December 29, 1975 be annulled.

Subsequently, TTTDC, Jose Silva, Emmanuel Ocampo, et. al., and another stockholder of TTTDC, (the
SILVA GROUP, now respondents), filed with the SEC a petition against the SANTOS GROUP who were
nominees of Rovels by virtue of the shares of stock issued pursuant to the December 29, 1975
Resolution, proceeded to act as directors and officers of TTTDC. In their petition, the SILVA GROUP
prayed that they be declared the true and lawful stockholders and incumbent directors and officers
of TTTDC.

SEC Hearing Officer rendered a Decision in favor of the SILVA GROUP and the decision became final
and executory as no appeal was interposed by either the SILVA GROUP or the SANTOS GROUP.

However, Rovels, to whom the TTTDC shares of stock (worth P108,000.00) were transferred,
claimed that it be declared the majority stockholder of TTTDC as against SILVA GROUP.

ISSUE:

Whether or not ROVELS (corporation) can be bound by the decision of SEC and the court
represented by its corporate officers?

RULING:

YES. A reading of the above petition shows that Rovels prayer to be declared the majority
stockholder of TTTDC is anchored on the December 29, 1975 TTTDC Board Resolution transferring its
shares of stock to Rovels as construction fee. This Resolution could have vested in Rovels a right to
be declared a stockholder of TTTDC. However, the same petition concedes that the December 29,
1975 Resolution was repealed by the March 1, 1976 Resolution. The petition likewise alleges that
there were prior interrelated cases filed with the SEC between the SILVA and SANTOS GROUPS,
namely: (1) SEC Case No. 1322 (wherein the SEC en banc in its Decision dated September 2, 1982
nullified the TTTDC Board Resolution dated December 29, 1975, which Decision was affirmed with
finality by this Court in G.R. No. 61863) and (2) SEC Case No. 3806 (wherein the SEC declared the
SILVA GROUP as the legitimate stockholders of TTTDC, not Rovels nominees [the SANTOS GROUP]).
Clearly, on the face of its petition, Rovels cannot claim to be the majority stockholder of TTTDC.

Relative to the second assigned error, Rovels contends that it is not bound by the SEC Decision in SEC
Case Nos. 1322 and 3806 and in G.R. No. 61863 as it was never a party in any of these cases.

Contrary to its claim, Rovels is bound by the previous SEC Decisions. It must be noted that Eduardo
Santos, President of Rovels, was one of the respondents in both SEC Case Nos. 1322 and 3806.
Clearly, Rovels and Eduardo Santos, being its President, share an identity of interests sufficient to
make them privies-in-law, as correctly found by the Court of Appeals in its assailed Decision.

In the case at bench, there can be no question that the rights claimed by petitioner and its
stockholders/directors/officers who were parties in SEC Case Nos. 1322 and 3806 are identical in
that they are both based on the December 29, 1975 Resolution. Stated differently, they shared an
identity of interest from which flowed an identity of relief sought, namely, to be declared owners of
the stocks of TTTDC, premised on the same December 29, 1975 Resolution. This identity of interest is
sufficient to make them privies-in-law, one to the other, and meets the requisite of substantial
identity of parties.

Rovels cannot take refuge in the argument that, as a corporation, it is imbued with personality
separate and distinct from that of the respondents in SEC Case Nos. 1322 and 3806. The legal fiction
of separate corporate existence is not at all times invincible and the same may be pierced when
employed as a means to perpetrate a fraud, confuse legitimate issues, or used as a vehicle to
promote unfair objectives or to shield an otherwise blatant violation of the prohibition against
forum-shopping. While it is settled that the piercing of the corporate veil has to be done with
caution, this corporate fiction may be disregarded when necessary in the interest of justice.

Reynoso vs Court of Appeals

Facts: 

Sometime in early 1960s, the Commercial Credit Corporation (CCC), a financing company and
investment firm, decided to organize franchise companies indifferent parts of the country, wherein it
shall hold 30% equity. Employees of the CCC were designated as resident managers of the franchise
companies. Petitioner Bibiano O. Reynoso IV was designated as the resident manager of the
franchise in Quezon City, known as the Commercial Credit Corporation of Quezon City. CCC-QC
entered into an exclusive agreement management contract with CCC whereby the latter was granted
the management and full control of the business activities of the former. Under the contract, CCC-
QC shall sell, discount and/or assign its receivables to CCC.
Subsequently, however, this discounting arrangement was discontinued pursuant to the so called
DOSRI rule, prohibiting the lending of funds by corporations to its directors, officers, stockholders
and other persons with related interest therein. On account of the new restrictions imposed by the
Central Bank policy by virtue of the DOSRI rule, CCC decided to form CCC Equity Corporation, a
wholly-owned subsidiary, to which CCC transferred its 30% equity in CCC-QC, together with 2 seats
in the latter’s Board of Directors.

A complaint for sum of money with preliminary attachment was filed by CCC-equity against
petitioner and the latter was also dismissed from employment to which the lower court’s decision
was rendered in favor of the petitioner and the same has become final and executory. CCC changed
its name to General Credit Corporation (GCC).

Issue: 

Whether or not the judgement in favor of the petitioner may be executed against respondent GCC.

Held: Yes.

A corporation is an artificial being created by operation of law, having the right of succession and the
powers, attributes, and properties expressly authorized by law or incident to its existence. It is an
artificial being invested by law with a personality separate and distinct from those of the persons
composing it as well as from that of any other legal entity to which it may be related. It was evolved
to make possible the aggregation and assembling of huge amounts of capital upon which big
business depends. It also has the advantage of non-dependence on the lives of those who compose
it even as it enjoys certain rights and conducts activities of natural persons.

Any piercing of the corporate veil has to be done with caution. However, the court will not hesitate
to use its supervisory and adjudicative powers where the corporate fiction is used as an unfair device
to achieve an inequitable result defraud creditors, evade contracts and obligations, or to shield it
from the effects of a court decision. The corporate fiction has to be disregarded when necessary in
the interest of justice.

The defense of separateness will be disregarded when the business affairs of a subsidiary
corporation are so controlled by the mother corporation to the extent that it becomes an instrument
or agent of its parent. But even when there is dominance over the affairs of the subsidiary, the
doctrine of piercing the veil of corporate fiction applies only when such fiction is used to defeat
public convenience, justify wrong, protect fraud or defend crime.

The organization of subsidiary corporations as what was done here is usually resorted to for
aggrupation of capital the ability to cover more territory and population, the decentralization of
activities best decentralized, and the securing of other legitimate advantages. But when the mother
corporation and its subsidiary cease to act in good faith and honest business judgement, when the
corporate device is used by the parent to avoid its liability for legitimate obligations of the
subsidiary, and when the corporate fiction is used to perpetrate fraud or promote injustice, the law
steps in to remedy the problem. When that happens, the corporate character is not necessarily
abrogated. It continuous for legitimate objectives. However, it is pursued in order to remedy
injustice, such as that inflicted in this case.