CORPORATION LAW
CASES 1 TO 12 The test in determining the applicability of the doctrine of
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1. CONCEPT BUILDERS INC., VS. NLRC
G.R. No. 108734 May 29, 1996
Facts:
Petitioner Concept Builders, Inc., a domestic
corporation engaged in the construction business. Private
respondents were employed by said company as laborers,
carpenters and riggers. However, they were illegally dismissed.
Aggrieved, private respondents filed a complaint for
illegal dismissal. The Labor Arbiter rendered
judgment ordering petitioner to reinstate private respondents
and to pay them back wages. It became final and executory.
The alias Writ of Execution cannot be enforced by the
sheriff because all the employees inside petitioner’s premises at
355 Maysan Road, Valenzuela, Metro Manila, claimed that they
were employees of Hydro Pipes Philippines, Inc. (HPPI) and
not by petitioner. Thus, NLRC issued a break-open order
against Concept Builders and HPPI.
Issue:  Whether the piercing the veil of corporate entity is
proper.
Held: Yes.
It is a fundamental principle of corporation law that a
corporation is an entity separate and distinct from its
stockholders and from other corporations to which it may be
connected. But, this separate and distinct personality of a
corporation is merely a fiction created by law for convenience
and to promote justice. So, when the notion of separate
juridical personality is used to defeat public convenience,
justify wrong, protect fraud or defend crime, or is used as a
device to defeat the labor laws, this separate personality of the
corporation may be disregarded or the veil of corporate fiction
pierced. This is true likewise when the corporation is merely an
adjunct, a business conduit or an alter ego of another
corporation.
The conditions under which the juridical entity may
be disregarded vary according to the peculiar facts and
circumstances of each case. No hard and fast rule can be
accurately laid down, but certainly, there are some probative
factors of identity that will justify the application of the
doctrine of piercing the corporate veil, to wit:
1. Stock ownership by one or common ownership of both
corporations.
2. Identity of directors and officers.
3. The manner of keeping corporate books and records.
4. Methods of conducting the business.
The SEC en banc explained the “instrumentality rule” which
the courts have applied in disregarding the separate juridical
personality of corporations as follows:
Where one corporation is so organized and
controlled and its affairs are conducted so that it is, in
fact, a mere instrumentality or adjunct of the other,
the fiction of the corporate entity of the
“instrumentality” may be disregarded. The control
necessary to invoke the rule is not majority or even
complete stock control but such domination of
instances, policies and practices that the controlled
corporation has, so to speak, no separate mind, will or
existence of its own, and is but a conduit for its
principal. It must be kept in mind that the control
must be shown to have been exercised at the time the
acts complained of took place. Moreover, the control
and breach of duty must proximately cause the injury
or unjust loss for which the complaint is made.
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 act in contravention of plaintiff’s legal rights; and
3. The aforesaid control and breach of duty must
proximately cause the injury or unjust loss complained of.
The absence of any one of these elements prevents “piercing
the corporate veil.” In applying the “instrumentality” or “alter
ego” doctrine, the courts are concerned with reality and not
form, with how the corporation operated and the individual
defendant’s relationship to that operation. 
Clearly, petitioner ceased its business operations in order to
evade the payment to private respondents of back wages and to
bar their reinstatement to their former positions. HPPI is
obviously a business conduit of petitioner corporation and its
emergence was skillfully orchestrated to avoid the financial
liability that already attached to petitioner corporation.
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2.  HEIRS OF FE TAN UY VS. INTERNATIONAL
EXCHANGE BANK
G.R. No. 166282 February 13, 2013
FACTS:
Respondent International Exchange Bank (iBank),
granted loans to Hammer Garments Corporation (Hammer),
covered by promissory notes and deeds of assignment. The
loans were likewise secured by a P 9 Million-Peso Real Estate
Mortgage executed by Goldkey Development Corporation
(Goldkey) over several of its properties and a P 25 Million-Peso
Surety Agreement signed by Chua and his wife, Fe Tan Uy
(Uy).
However, Hammer defaulted in the payment of its loans,
prompting iBank to foreclose on Goldkey’s third-party Real
Estate Mortgage. The mortgaged properties were sold for P 12
million during the foreclosure sale, leaving an unpaid balance
of P 13,420,177.62.9. For failure of Hammer to pay the
deficiency, iBank filed a Complaint for sum of money on
December 16, 1997 against Hammer, Chua, Uy, and Goldkey
before the Regional Trial Court, Makati City (RTC).
Hammer did not file any Answer, thus it was held in
default. On the other hand, Uy claimed that she was not liable
to iBank because she never executed a surety agreement in
favor of iBank. Goldkey also denies liability, averring that it
acted only as a third-party mortgagor and that it was a
corporation separate and distinct from Hammer.
RTC decision:
ruled in favor of iBank. The lower court said that
while it made the pronouncement that the signature of Uy on
the Surety Agreement was a forgery, it nevertheless held her
liable for the outstanding obligation of Hammer because she
was an officer and stockholder of the said corporation. The
RTC agreed with Goldkey that as a third-party mortgagor, its
liability was limited to the properties mortgaged. It came to the
conclusion, however, that Goldkey and Hammer were one and
the same entity.
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 Aggrieved, the heirs of Uy and
Goldkey (petitioners)  elevated the case to the CA.
CA decision:
affirming the findings of the RTC. The CA found that
iBank was not negligent in evaluating the financial stability of
Hammer. According to the appellate court, iBank was induced
to grant the loan because petitioners, with intent to defraud the
bank, submitted a falsified Financial Report for 1996 which
incorrectly declared the assets and cashflow of Hammer.
Because petitioners acted maliciously and in bad faith and used
the corporate fiction to defraud iBank, they should be treated
as one and the same as Hammer.
Hence, the present petitions filed separately by the
heirs of Uy and Goldkey which later on consolidated by this
Court.
ISSUE: Whether or not the doctrine of piercing the corporate
veil should apply in this case?
RULING: NO.
RATIO:
Basic is the rule in corporation law that a corporation
is a juridical entity which is vested with a legal personality
separate and distinct from those acting for and in its behalf
and, in general, from the people comprising it. Following this
principle, obligations incurred by the corporation, acting
through its directors, officers and employees, are its sole
liabilities. A director, officer or employee of a corporation is
generally not held personally liable for obligations incurred by
the corporation.
Nevertheless, this legal fiction may be disregarded if it
is used as a means to perpetrate fraud or an illegal act, or as a
vehicle for the evasion of an existing obligation, the
circumvention of statutes, or to confuse legitimate issues.
In this case, petitioners are correct to argue that it was not
alleged, much less proven, that Uy committed an act as an
officer of Hammer that would permit the piercing of the
corporate veil. A reading of the complaint reveals that with
regard to Uy, iBank did not demand that she be held liable for
the obligations of Hammer because she was a corporate officer
who committed bad faith or gross negligence in the
performance of her duties such that the lifting of the corporate
mask would be merited. What the complaint simply stated is
that she, together with her errant husband Chua, acted as
surety of Hammer, as evidenced by her signature on the Surety
Agreement which was later found by the RTC to have been
forged.
The Court emphasized that the application of the
doctrine of piercing the corporate veil should be done with
caution. A court should be mindful of the milieu where it is to
be applied. It must be certain that the corporate fiction was
misused to such an extent that injustice, fraud, or crime was
committed against another, in disregard of its rights. The
wrongdoing must be clearly and convincingly established; it
cannot be presumed. Otherwise, an injustice that was never
unintended may result from an erroneous application.
However, the Court finds Goldkey liable for it is a
mere alter ego of Hammer.
Goldkey contends, among others, that iBank is
estopped from expanding Goldkey’s liability beyond the real
estate mortgage. It adds that it did not authorize the execution
of the said mortgage. Finally, it passes the blame on to iBank
for failing to exercise the requisite due diligence in properly
evaluating Hammer’s creditworthiness before it was extended
an omnibus line.
The Court disagrees.
Goldkey’s argument, that iBank is barred from
pursuing Goldkey for the satisfaction of the unpaid obligation
of Hammer because it had already limited its liability to the
real estate mortgage, is completely absurd. Goldkey needs to be
reminded that it is being sued not as a consequence of the real
estate mortgage, but rather, because it acted as an alter ego of
Hammer. Accordingly, they must be treated as one and the
same entity, making Goldkey accountable for the debts of
Hammer.
Similarly, Goldkey is undoubtedly mistaken in
claiming that iBank is seeking to enforce an obligation of Chua.
The records clearly show that it was Hammer, of which Chua
was the president and a stockholder, which contracted a loan
from iBank. What iBank sought was redress from Goldkey by
demanding that the veil of corporate fiction be lifted so that it
could not raise the defense of having a separate juridical
personality to evade liability for the obligations of Hammer.
Under a variation of the doctrine of piercing the veil of
corporate fiction, 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 two corporations are
distinct entities and treat them as identical or one and the
same.
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3. PNB VS. HYDRO RESOURCES
G.R. No. 167561 March 13, 2013
(Topic: Doctrine of Piercing the Veil of Corporate Fiction)
FACTS:
Sometime in 1984, petitioners DBP and PNB
foreclosed on certain mortgages made on the properties of
Marinduque Mining and Industrial Corporation (MMIC). As a
result of the foreclosure, DBP and PNB acquired substantially
all the assets of MMIC and resumed the business operations of
the defunct MMIC by organizing NMIC.7 DBP and PNB owned
57% and 43% of the shares of NMIC, respectively, except for
five qualifying shares. As of September 1984, the members of
the Board of Directors of NMIC, namely, Jose Tengco, Jr.,
Rolando Zosa, Ruben Ancheta, Geraldo Agulto, and Faustino
Agbada, were either from DBP or PNB.
Subsequently, NMIC engaged the services of Hercon,
Inc., for NMIC’s Mine Stripping and Road Construction
Program in 1985 for a total contract price of P35,770,120. After
computing the payments already made by NMIC under the
program and crediting the NMIC’s receivables from
Hercon, Inc., the latter found that NMIC still has an unpaid
balance of P8,370,934.74.10 Hercon, Inc. made several
demands on NMIC, including a letter of final demand dated
August 12, 1986, and when these were not heeded, a complaint
for sum of money was filed in the RTC of Makati, Branch 136
seeking to hold petitioners NMIC, DBP, and PNB solidarily
liable for the amount owing Hercon, Inc.
Subsequent to the filing of the complaint, Hercon, Inc.
was acquired by HRCC in a merger.
Thereafter, on December 8, 1986, then President
Corazon C. Aquino issued Proclamation No. 50 creating the
APT for the expeditious disposition and privatization of certain
government corporations and/or the assets thereof. Pursuant
to the said Proclamation, on February 27, 1987, DBP and PNB
executed their respective deeds of transfer in favor of the
National Government assigning, transferring and conveying
certain assets and liabilities, including their respective stakes in
NMIC. In turn and on even date, the National Government
transferred the said assets and liabilities to the APT as trustee
under a Trust Agreement.
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ISSUE:
Whether or not there is sufficient ground to pierce the
veil of corporate fiction of NMIC and held DBP and PNB
solidarily liable with NMIC?
RULING:
No.
From all indications, it appears that NMIC is a mere
adjunct, business conduit or alter ego of both DBP and PNB.
Thus, the DBP and PNB are jointly and severally liable with
NMIC for the latter’s unpaid obligations to plaintiff.
Then concluded that, "in keeping with the concept of
justice and fair play," the corporate veil of NMIC should be
pierced.
For to treat NMIC as a separate legal entity from DBP
and PNB for the purpose of securing beneficial contracts, and
then using such separate entity to evade the payment of a just
debt, would be the height of injustice and iniquity. Surely that
could not have been the intendment of the law with respect to
corporations.
The doctrine of piercing the corporate veil applies
only in three (3) basic areas, namely: 1) defeat of public
convenience as when the corporate fiction is used as a vehicle
for the evasion of an existing obligation; 2) fraud cases or when
the corporate entity is used to justify a wrong, protect fraud, or
defend a crime; or 3) alter ego cases, where a corporation is
merely a farce since it is a mere alter ego or business conduit of
a person, or where the corporation is so organized and
controlled and its affairs are so conducted as to make it merely
an instrumentality, agency, conduit or adjunct of another
corporation.
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4. PNB VS. RITRATTO GROUP
G.R. No. 142616 July 31, 2001
FACTS:
 May 29, 1996: 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 Ritratto Group, Inc. (Ritartto) in the amount of
US$300K secured by real estate mortgages constituted
over 4 parcels of land in Makati City
 September 1996: increased successively to
US$1,140,000.00  subsidiary as its own.
 November 1996: to US$1,290,000.00  (j) The directors or executives of the subsidiary do not act
 February 1997: US$1,425,000.00  independently in the interest of the subsidiary but take
 April 1998: decreased to US$1,421,316.18
 Ritratto Group, Inc. made repayments of the loan incurred
by remitting those amounts to their loan account with
PNB-IFL in Hong Kong.
 April 30, 1998: outstanding amounted to US$1,497,274.70
 PNB-IFL, through its attorney-in-fact PNB, notified them
of the foreclosure of all the real estate mortgages and that
the properties subjected
 May 25, 1999:  Ritratto Group, Inc filed a complaint for
injunction with prayer for the issuance of a writ of
preliminary injunction and/or temporary restraining
order before the RTC. -granted 72-hour TRO
 RTC and CA: dismissed motion to dismiss
 PNB-IFL, is a wholly owned subsidiary of defendant
Philippine National Bank, the suit against the defendant
PNB is a suit against PNB-IFL
 Rittratto: entire credit facility is void as it contains
stipulations in violation of the principle of mutuality of
contracts 
ISSUE: whether or not PNB is an alter ego of PNB-IFL
HELD: NO. Petition is granted
 PNB is an agent with limited authority and specific duties
under a special power of attorney incorporated in the real
estate mortgage. 
 not privy to the loan contracts entered into by PNB-IFL.
 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. 
 general rule the stock ownership alone by one corporation
of the stock of another does not thereby render the
dominant corporation liable for the torts of the subsidiary
unless the separate corporate existence of the subsidiary is
a mere sham, or unless the control of the subsidiary is
such that it is but an instrumentality or adjunct of the
dominant corporation. 
 The Circumstance rendering the subsidiary an
instrumentality (common circumstances)
(a) The parent corporation owns all or most of the capital
stock of the subsidiary.
(b) The parent and subsidiary corporations have common
directors or officers.
(c) The parent corporation finances the subsidiary.
(d) The parent corporation subscribes to all the capital
stock of the subsidiary or otherwise causes its
incorporation.
(e) The subsidiary has grossly inadequate capital.
(f) The parent corporation pays the salaries and other
expenses or losses of the subsidiary.
(g) The subsidiary has substantially no business except
with the parent corporation or no assets except those
conveyed to or by the parent corporation.
(h) In the papers of the parent corporation or in the
statements of its officers, the subsidiary is described as
a department or division of the parent corporation, or
its business or financial responsibility is referred to as
the parent corporation's own.
(i) The parent corporation uses the property of the
their orders from the parent corporation.
(k) The formal legal requirements of the subsidiary are not
observed.
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5. SAVERIO VS. PUYAT
G.R. No. 186433 November 27, 2013
PETITIONER: Nuccio Saverio and NS International
Inc.
RESPONDENT: Alfonso G. Puyat
SUMMARY: NSI allegedly owed Puyat a P460k balance
from a MOA that Nuccio signed on behalf of NSI. RTC and CA
ruled in favor of Puyat, piercing the corporate veil. SC held
that first, the "Breakdown of Account" (basis for the P460k
balance) was not supported by the evidence Puyat presented.
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 Second, the corporate veil should not be pierced because
Puyat failed to prove that alter-ego elements were present.
The indicators that the RTC and CA appreciated in the case
were not sufficient to pierce the corporate veil. Hence, the SC
ruled in favor of Nuccio and NSI, and the case was remanded
to the RTC.
DOCTRINE: Mere ownership by a single stockholder or by
another corporation of all or nearly all of the capital stocks of
the corporation is not, by itself, a sufficient ground for
disregarding the separate corporate personality. Other than
mere ownership of capital stocks, circumstances showing that
the corporation is being used to commit fraud or proof of
existence of absolute control over the corporation have to be
proven. In short, before the corporate fiction can be
disregarded, alter-ego elements must first be
sufficiently established. Mere ownership by a
stockholder of all or nearly all of the capital stocks of
a corporation does not, by itself, justify the disregard
of the separate corporate personality. In order for the
ground of corporate ownership to stand, the following
circumstances should also be established: (1) that the
stockholders had control or complete domination of the
corporation’s finances and that the latter had no separate
existence with respect to the act complained of; (2) that they
used such control to commit a wrong or fraud; and (3) the
control was the proximate cause of the loss or injury.
FACTS:
1. Respondent Puyat granted a loan to Petitioner NS
International Inc. (NSI), pursuant to the Memorandum of
Agreement and Promissory Note (MOA) between NSI and
Puyat. During the signing of the MOA, NSI was represented by
Co-Petitioner Nuccio.
• Puyat would extend a credit line with a limit of P500k
to NSI, to be paid within 30 days of signing the
document
• Loan carried an interest rate fo 17% per annum, or at
an adjusted rate of 25% per annum if the payment is
beyond the stipulated period.
• NSI received P300k and machineries for their
fertilizer processing business, but it failed to
materialize.
2. Nuccio made personal payments to Puyat amounting to
P600k. But Nuccio allegedly had an outstanding balance of
P460k, and when Nuccio defaulted, Puyat filed a collection suit
with the RTC because Nuccio still allegedly owed Puyat for the
value of the machineries as shown by the Breakdown of
Account that Puyat presented in court.
3. Nuccio contends that Puyat's allegation isn't true because
they've already paid the loan as evidenced by the receipt for
P600k, and further submit that their remaining obligation to
pay for the machineries was extinguished because their
business failed to materialize.
4. RTC ruled for Puyat. The P600k didn't completely
extinguish the loan. Further, RTC said that Nuccio and NSI
are one and the same because of the ff. indicators [henced
they applied the doctrine of piercing the corporate veil]:
• 1) Nuccio's act of entering a loan with Puyat for
financing NSI's business
• 2) The "NS" in "NSI" stands for "Nuccio Saverio" 5.
CA affirmed RTC. Nuccio and NSI are one and the
same because of the ff.:
• 1) Nuccio owned 40% of NSI
• 2) Nuccio personally entered into the MOA with Puyat
• 3) Nuccio and NSI were represented by the same
counsel
• 4) NSI did not object to Nuccio's acts, showing
Nuccio's control over the corporation
• 5) Nuccio's control over NSI was used to commit a
wrong/fraud.
6. NUCCIO AND NSI'S ARGUMENTS:
• The Breakdown of Account was hearsay because
Ramoncito Puyat, the one who prepared it, was not
presented in court to authenticate it.
• The award is not in the RTC's ruling, and the specific
amount is hence undetermined
• There is a need for proper accounting to determine
the exact liability
• There was no showing that corporate fiction was used
to defeat public convenience, justify a wrong, protect
fraud, or defend a crime
• Nuccio's mere ownership of 40% doesn't justify
piercing the separate and distinct personality of NSI
7. ALFONSO PUYAT'S ARGUMENTS:
• These are factual issues, so it's beyond the ambit of a
Rule 45 petition (present case) as to the documentary
and testimonial evidence presented in the RTC and
affirmed by the CA.
ISSUES: WON RTC and CA were correct in applying the
piercing of the corporate veil doctrine and in holding Nuccio
and NSI solidarily liable for the P460k allegedly owed to
Puyat?- NO
RULING: Petition GRANTED in favor of Nuccio and
NSI. RTC and CA rulings are reversed and set aside. The case
is remanded to RTC for proper accounting and reception of
evidence to determine NSI's indebtedness to Puyat.
RATIO: [AS TO PIERCING THE CORPORATE VEIL]
1. Piercing the veil of corporate fiction is not justified.
Nuccio and NSI are NOT one and the same.
2. The rule is settled that a corporation is vested
by law with a personality separate and distinct from
the persons composing it. Following this principle, a
stockholder, generally, is not answerable for the acts or
liabilities of the corporation, and vice versa. The obligations
incurred by the corporate officers, or other persons acting as
corporate agents, are the direct accountabilities of the
corporation they represent, and not theirs. A director, officer or
employee of a corporation is generally not held personally
liable for obligations incurred by the corporation and while
there may be instances where solidary liabilities may arise,
these circumstances are exceptional.
3. Mere ownership by a single stockholder or by another
corporation of all or nearly all of the capital stocks of the
corporation is not, by itself, a sufficient ground for
disregarding the separate corporate personality. Other than
mere ownership of capital stocks, circumstances showing that
the corporation is being used to commit fraud or proof of
existence of absolute control over the corporation have to be
proven. In short, before the corporate fiction can be
disregarded, alter-ego elements must first be
sufficiently established.
4. Hi-Cement Corporation v. Insular Bank of Asia and
America: SC did NOT apply piercing the veil doctrine on the
ground that the corporation was a mere alter ego because
mere ownership by a stockholder of all or nearly all of
the capital stocks of a corporation does not, by itself,
justify the disregard of the separate corporate
personality. In order for the ground of corporate ownership
to stand, the following circumstances should also be
established: (1) that the stockholders had control or complete
Page 4 of 10
domination of the corporation’s finances and that the latter
had no separate existence with respect to the act complained
of; (2) that they used such control to commit a wrong or fraud;
and (3) the control was the proximate cause of the loss or
injury.
5. IN THIS CASE: The circumstances do not
warrant the piercing of the veil of NSI’s corporate
fiction. Aside from the undisputed fact of Nuccio’s 40%
shareholdings with NSI, the RTC applied the piercing the veil
doctrine based on the following reasons:
• 1) There was no board resolution authorizing Nuccio
to enter into a contract of loan.
• 2) Nuccio and NSI were represented by one and the
same counsel.
• 3) NSI did not object to Nuccio’s act of contracting the
loan.
• 4) The control over NSI was used to commit a wrong
or fraud.
• 5) Nuccio’s admission that "NS" in the corporate
name "NSI" means "Nuccio Saverio."
6. SC is NOT convinced of the sufficiency of these above
cited reasons. RTC failed to provide a clear and convincing
explanation why the doctrine was applied. It merely declared
that its application of the doctrine of piercing the veil of
corporate fiction has a basis, specifying for this purpose the act
of Nuccio’s entering into a contract of loan with the respondent
and the reasons stated above.
7. The records of the case, however, do not show that
Nuccio had control or domination over NSI’s finances. The
mere fact that it was Nuccio who, in behalf of the
corporation, signed the MOA is not sufficient to prove
that he exercised control over the corporation’s
finances. Neither the absence of a board resolution
authorizing him to contract the loan nor NSI’s failure
to object thereto supports this conclusion. These may be
indicators that, among others, may point the proof required to
justify the piercing the veil of corporate fiction, but by
themselves, they do not rise to the level of proof
required to support the desired conclusion. 8. It
should be noted in this regard that while Nuccio was the
signatory of the loan and the money was delivered to him, the
proceeds of the loan were unquestionably intended for NSI’s
proposed business plan. That the business did not materialize
is not also sufficient proof to justify a piercing, in the absence
of proof that the business plan was a fraudulent scheme geared
to secure funds from the respondent for the petitioners’
undisclosed goals.
9. Considering that the basis for holding Nuccio liable for the
payment of the loan has been proven to be insufficient, we find
no justification for the RTC to hold him jointly and solidarily
liable for NSI’s unpaid loan. Similarly, we find that the CA
ruling is wanting in sufficient explanation to justify the
doctrine’s application and affirmation of the RTC’s ruling. With
these points firmly in mind, we hold that NSI’s liability should
not attach to Nuccio.
(just in case itanong) RATIO AS TO SC REFUTING
THE RTC'S BASIS IN AWARDING THE P460k IN
FAVOR OF PUYAT:
1. RTC principally relied on the Breakdown of Account.
HOWEVER, the Breakdown of Account and their
corresponding amounts are not supported by the respondent’s
presented evidence. The itemized expenses, as repeatedly
pointed out by the petitioners, were not proven, and the
remaining indebtedness, after the partial payment of
P600,000.00, was merely derived by the RTC from the
Breakdown of Account.
2. Significantly, the RTC ruling neither showed how the
award was computed nor how the interest and penalty were
calculated. In fact, it merely declared the petitioners liable for
the amount claimed by the respondent and adopted the
breakdown of liability in the Breakdown of Account. This
irregularity is even aggravated by the RTC’s explicit refusal to
explain why the payment of P600,000.00 did not extinguish
the debt. While it may be true that the petitioners’
indebtedness, aside from the cash loan of P300,000.00,
undoubtedly covered the value of the machineries, the RTC
decision was far from clear and instructive on the
actual remaining indebtedness (inclusive of the
machineries’ value, penalties and interests) after the
partial payment was made and how these were all computed.
3. We, therefore, hold it inescapable that the prayer for
proper accounting to determine the petitioners’ actual
remaining indebtedness should be granted. As this requires
presentation of additional evidence, a remand of the case is
only proper and in order.
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6.  COMMISSIONER OF CUSTOMS VS.
OIL LINK INTERNATIONAL
Corporation G.R. No. 161759 July 2, 2014
FACTS:
The District Collector of the Port of Manila, formally
demanded that Union Refinery Corporation (URC) pay the
taxes and duties on its oil imports that had arrived between
January 6, 1991 and November 7, 1995 at the Port of Lucanin in
Mariveles, Bataan.
The Commissioner also made the same demand, and
an assessment.  Oilink formally protested the assessment.
Oilink appealed to the Court of Tax Appeals (CTA),
seeking the nullification of the assessment for having been
issued without authority and with grave abuse of discretion
tantamount to lack of jurisdiction because the Government was
thereby shifting the imposition from URC to Oilink.
Thus the petition by the Commissioner. It argued,
among others, that the CTA gravely erred in holding that the
Commissioner of Customs could not pierce the veil of corporate
fiction.
The CA concurred with the CTA, that the
Commissioner did not submit any evidence to support his
allegations.
ISSUE:
Is there a ground to pierce the corporate veil of
fiction?
RULING:
None.
In Philippine National Bank v. Ritratto Group, Inc.,
the Court has outlined the following circumstances thatare
useful in the determination of whether a subsidiary is a mere
instrumentality of the parent-corporation, viz:
1. Control, not mere majority or complete control, but
complete domination, not only of finances butof policy and
business practice in respect to the transaction attacked so that
the corporate entity as to this transaction had at the time no
separatemind, will or existence of its own;
2. Such control must have been used by the defendant
to commit fraud or wrong, to perpetrate the violation of a
statutory or other positive legal duty, or dishonest and, unjust
act incontravention of plaintiff's legal rights; and
3. The aforesaid control and breach of duty must
proximately cause the injury or unjust loss complained of.
Page 5 of 10
 In applying the "instrumentality" or"alter ego"
doctrine, the courts are concerned with reality, not form, and
with how the corporation operated and the individual
defendant's relationship to the operation. 11 Consequently, the
absence of any one of the foregoing elements disauthorizes the
piercing of the corporate veil.
Indeed, the doctrine of piercing the corporate veil has
no application here because the Commissioner of Customs did
not establish that Oilink had been set up to avoid the payment
of taxes or duties, or for purposes that would defeat public
convenience, justify wrong, protect fraud, defend crime,
confuse legitimate legal or judicial issues, perpetrate deception
or otherwise circumvent the law. It is also noteworthy that
from the outset the Commissioner of Customs sought to collect
the deficiency taxes and duties from URC, and that it was only
on July 2, 1999 when the Commissioner of Customs sent the
demand letter to both URC and Oilink. That was revealing,
because the failure of the Commissioner of Customs to pursue
the remedies against Oilink from the outset manifested that its
belated pursuit of Oilink was only an afterthought.
_______________________________________
7. WPM INTERNATIONAL TRADING INC., VS.
LABAYEN
G.R. No. 182770 September 17,2014
DOCTRINE:
For the piercing of the corporate veil to apply it must
be clearly established that the separate and distinct personality
of the corporation is used to justify a wrong, protect fraud, or
perpetrate a deception. The court must be certain that the
corporate fiction was misused to such an extent that injustice,
fraud, or crime was committed against another. It cannot be
presumed.
FACTS:
 The petitioner, WPM International Trading, Inc.
(WPM), is a domestic corporation engaged in the
restaurant business, while Warlito P. Manlapaz is its
president.
 Sometime in 1990, WPM entered into a management
agreement with Labayen, by virtue of which the
respondent was authorized to operate, manage and
rehabilitate Quickbite, a restaurant owned and
operated by WPM. As part of her tasks, the
respondent looked for a contractor who would
renovate the two existing Quickbite outlets in
Divisoria, Manila and Lepanto St., University Belt,
Manila. Pursuant to the agreement, the respondent
engaged the services of CLN Engineering Services
(CLN) to renovate Quickbite-Divisoria at the cost of
P432,876.02.
 On June 13, 1990, Quickbite-Divisoria’s renovation
was finally completed, and its possession was
delivered to the respondent. However, out of the
P432,876.02 renovation cost, only the amount of
P320,000.00 was paid to CLN, leaving a balance of
P112,876.02
 On October 19, 1990, CLN filed a complaint for sum of
money and damages before the RTC against the
respondent and Manlapaz. The respondent was
declared in default for her failure to file a responsive
pleading. The RTC found the respondent liable to pay
CLN actual damages in the amount of P112,876.02
with 12% interest per annum from June 18, 1990 (the
date of first demand) and 20% attorney’s fees.
 Respondent instituted a complaint for damages
against the petitioners, WPM and Manlapaz.
Respondent alleged that in the previous RTC case, she
was adjudged liable for a contract that she entered
into for and in behalf of the petitioners, to which she
should be entitled to reimbursement. Her
participation in the management agreement was
limited only to introducing Manlapaz to Engineer
Carmelo Neri, CLN’s general manager. It was actually
Manlapaz and Neri who agreed on the terms and
conditions of the agreement and that when the
complaint for damages was filed against her. She was
abroad and that she did not know of the case until she
returned to the Philippines and received a copy of the
decision of the RTC.
 In his defense, Manlapaz claims that the respondent
had exceeded her authority as agent of WPM, the
renovation agreement should only bind her and since
WPM has a separate and distinct personality,
Manlapaz cannot be made personally liable for the
respondent’s claim.
 RTC held that the respondent is entitled to indemnity
from Manlapaz. Based on the records, there is a clear
indication that WPM is a mere instrumentality or
business conduit of Manlapaz. The RTC also found
that Manlapaz had complete control over WPM
considering that he is its chairman, president and
treasurer at the same time.
 CA affirmed and held that the petitioners are barred
from raising as a defense the respondent’s alleged lack
of authority to enter into the renovation agreement in
view of their tacit ratification of the contract.
ISSUE:
1. Whether or not WPM is a mere instrumentality, alter-ego,
and business conduit of Manlapaz? No.
2. Whether or not Manlapaz is jointly and severally liable with
WPM to the respondent for reimbursement, damages and
interest? No.
HELD:
Piercing the corporate veil based on the alter ego
theory requires the concurrence of three elements, namely:
a) 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;
b) Such control must have been used by the defendant to
commit fraud or wrong, to perpetuate the violation of a
statutory or other positive legal duty, or dishonest and
unjust act in contravention of plaintiff’s legal right; and
c) The aforesaid control and breach of duty must have
proximately caused the injury or unjust loss complained
of.
The absence of any of these elements prevents
piercing the corporate veil.
In the present case, the attendant circumstances do
not establish that WPM is a mere alter ego of Manlapaz.
Aside from the fact that Manlapaz was the principal
stockholder of WPM, records do not show that WPM was
organized and controlled, and its affairs conducted in a manner
that made it merely an instrumentality, agency, conduit or
adjunct of Manlapaz.
The respondent failed to prove that Manlapaz, acting
as president, had absolute control over WPM. Even granting
that he exercised a certain degree of control over the finances,
policies and practices of WPM, in view of his position as
president, chairman and treasurer of the corporation, such
control does not necessarily warrant piercing the veil of
Page 6 of 10
corporate fiction since there was not a single proof that WPM
was formed to defraud CLN or the respondent, or that
Manlapaz was guilty of bad faith or fraud.
On the contrary, the evidence establishes that CLN
and the respondent knew and acted on the knowledge that they
were dealing with WPM for the renovation of the latter’s
restaurant, and not with Manlapaz. That WPM later reneged on
its monetary obligation to CLN, resulting to the filing of a civil
case for sum of money against the respondent, does not
automatically indicate fraud, in the absence of any proof to
support it.
It is emphasized that the piercing of the veil of
corporate fiction is frowned upon and thus, must be done with
caution. It can only be done if it has been clearly established
that the separate and distinct personality of the corporation is
used to justify a wrong, protect fraud, or perpetrate a
deception. The court must be certain that the corporate fiction
was misused to such an extent that injustice, fraud, or crime
was committed against another, in disregard of its rights; it
cannot be presumed.
NOTES:
The doctrine of piercing the corporate veil applies
only in three (3) basic instances, namely:
a) when the separate and distinct corporate personality defeats
public convenience, as when the corporate fiction is used as a
vehicle for the evasion of an existing obligation
b) in fraud cases, or when the corporate entity is used to justify
a wrong, protect a fraud, or defend a crime; or
c) is used in alter ego cases, i.e., where a corporation is
essentially a farce, since it is a mere alter ego or
business conduit of a person, or where the
corporation is so organized and controlled and its
affairs so conducted as to make it merely an
instrumentality, agency, conduit or adjunct of
another corporation.
___________________________________________
8.  LANUZA VS. BF CORP
G.R. NO. 174938 OCTOBER 1, 2014
FACTS:
In 1993, BF Corporation filed a collection complaint
with the Regional Trial Court against Shangri-La and the
members of its board of directors: Alfredo C. Ramos, Rufo
B.Colayco, Antonio O. Olbes, Gerardo Lanuza, Jr., Maximo G.
Licauco III, and Benjamin C. Ramos. BF Corporation alleged in
its complaint that on December 11, 1989 and May 30, 1991, it
entered into agreements with Shangri-La wherein it undertook
to construct for Shangri-La a mall and a multilevel parking
structure along EDSA.Shangri-La had been consistent in
paying BF Corporation in accordance with its progress billing
statements. However, by October 1991, Shangri-La started
defaulting in payment.
BF Corporation alleged that Shangri-La induced BF
Corporation to continue with the construction of the buildings
using its own funds and credit despite Shangri-La’s default.
According to BF Corporation, Shangri-La misrepresented that
it had funds to pay for its obligations with BF Corporation, and
the delay in payment was simply a matter of delayed processing
of BF Corporation’s progress billing statements. BF
Corporation eventually completed the construction of the
buildings. Shangri-La allegedly took possession of the
buildings while still owing BF Corporation an outstanding
balance.
BF Corporation alleged that despite repeated
demands, Shangri-La refused to pay the balance owed
to it.It also alleged that the Shangri-La’s directors were in bad
faith in directing Shangri-La’s affairs.
Therefore, they should be held jointly and severally
liable with Shangri-La for its obligations as well as for the
damages that BF Corporation incurred as a result of Shangri-
La’s default. On August 3, 1993, Shangri-La, Alfredo C. Ramos,
Rufo B. Colayco, Maximo G. Licauco III, and Benjamin C.
Ramos filed a motion to suspend the proceedings in view of BF
Corporation’s failure to submit its dispute to arbitration, in
accordance with the arbitration clause provided in its contract.
Petitioners filed their comment on Shangri-La’s and
BF Corporation’s motions, praying that they be excluded from
the arbitration proceedings for being non-parties to Shangri-
La’s and BF Corporation’s agreement.
ISSUE: 
Whether or not petitioners as directors of Shangri-La
is personally liable for the contractual obligations entered into
by the corporation.
HELD: 
No. Because a corporation’s existence is only by
fiction of law, it can only exercise its rights and powers through
its directors, officers, or agents, who are all natural persons. A
corporation cannot sue or enter into contracts without them.
A consequence of a corporation’s separate personality
is that consent by a corporation through its representatives is
not consent of the representative, personally. Its obligations,
incurred through official acts of its representatives, are its own.
A stockholder, director, or representative does not become a
party to a contract just because a corporation executed a
contract through that stockholder, director or representative.
Hence, a corporation’s representatives are generally not bound
by the terms of the contract executed by the corporation. They
are not personally liable for obligations and liabilities incurred
on or in behalf of the corporation.
A submission to arbitration is a contract. As such, the
Agreement, containing the stipulation on arbitration, binds the
parties thereto, as well as their assigns and heirs.
When there are allegations of bad faith or malice
against corporate directors or representatives, it becomes the
duty of courts or tribunals to determine if these persons and
the corporation should be treated as one. Without a trial,
courts and tribunals have no basis for determining whether the
veil of corporate fiction should be pierced. Courts or tribunals
do not have such prior knowledge. Thus, the courts or tribunals
must first determine whether circumstances exist towarrant
the courts or tribunals to disregard the distinction between the
corporation and the persons representing it. The determination
of these circumstances must be made by one tribunal or court
in a proceeding participated in by all parties involved,
including current representatives of the corporation, and those
persons whose personalities are impliedly the sameas the
corporation. This is because when the court or tribunal finds
that circumstances exist warranting the piercing of the
corporate veil, the corporate representatives are treated as the
corporation itself and should be held liable for corporate acts.
The corporation’s distinct personality is disregarded, and the
corporation is seen as a mere aggregation of persons
undertaking a business under the collective name of the
corporation.
A corporation is an artificial entity created by fiction
of law. This means that while it is not a person, naturally, the
law gives it a distinct personality and treats it as such. A
corporation, in the legal sense, is an individual with a
personality that is distinct and separate from other persons
including its stockholders, officers, directors, representatives,
and other juridical entities. The law vests in corporations
rights,powers, and attributes as if they were natural persons
with physical existence and capabilities to act on their own. For
Page 7 of 10
instance, they have the power to sue and enter into
transactions or contracts. Section 36 of the Corporation Code
enumerates some of a corporation’s powers, thus:
Section 36. Corporate powers and capacity.–
Every corporation incorporated under this Code has
the power and capacity: 1. To sue and be sued in its
corporate name; 2. Of succession by its corporate
name for the period of time stated in the articles of
incorporation and the certificate ofincorporation; 3.
To adopt and use a corporate seal; 4. To amend its
articles of incorporation in accordance with the
provisions of this Code; 5. To adopt by-laws, not
contrary to law, morals, or public policy, and to
amend or repeal the same in accordance with this
Code; 6. In case of stock corporations, to issue or sell
stocks to subscribers and to sell treasury stocks in
accordance with the provisions of this Code; and to
admit members to the corporation if it be a non-stock
corporation; 7. To purchase, receive, take or grant,
hold, convey, sell, lease, pledge, mortgage and
otherwise deal with such real and personal property,
including securities and bonds of other corporations,
as the transaction of the lawful business of the
corporation may reasonably and necessarily require,
subject to the limitations prescribed by law and the
Constitution; 8. To enter into merger or consolidation
with other corporations as provided in this Code; 9.
To make reasonable donations, including those for the
public welfare or for hospital, charitable, cultural,
scientific, civic, or similar purposes: Provided, That no
corporation, domestic or foreign, shall give donations
in aid of any political party or candidate or for
purposes of partisan political activity; 10. To establish
pension, retirement, and other plans for the benefit of
its directors, trustees, officers and employees; and 11.
To exercise such other powers as may be essential or
necessary to carry out its purpose or purposes as
stated in its articles of incorporation .
___________________________________________
9. ABBOT LABORATORIES VS. ALCARAZ
701 SCRA 682
___________________________________________
10. POLYMER RUBBER CORPORATION VS
SALAMUDING
702 SCRA 153
FACTS: Bayolo Salamuding, Mariano Gulanan and Rodolfo
Raif were employees of Polymer Rubber Corporation
dismissed after allegedly committing certain irregularities
against Polymer.
Salamuding et al filed a complaint for ULP and ID,
nonpayment of overtime and 13th month against Polymer and
its director Joseph Ang, highest ranking officer.
LA: NO ULP but there was ID. Ordered the reinstatement and
back wages, 13th month, OT pay, moral and exemplary
damages and atty’s fees.
A writ of execution was subsequently issued to implement said
judgment.
Polymer appealed to the NLRC which affirmed the decision
with modifications. The NLRC deleted the award of moral and
exemplary damages, SIL pay, and modified the computation of
13th month pay. A writ of execution was subsequently issued
based on the NLRC decision.
The case was elevated to the SC. On September 29, 1993, the
SC affirmed the disposition of the NLRC but modified by
deleting the overtime pay.
On September 30, Polymer ceased its operations.
In 1994, the LA issued a writ of execution based on the SC
resolution. It was returned unsatisfied. Another alias writ of
execution was issued in 1997.
In the latter part of 2004, Polymer with all its improvements
in the premises was gutted by fire.
On December 2004, Salamuding et al filed a Motion for
Recomputation and Issuance of 5th Alias Writ of Execution.
The Research and Computation Unit of NLRC came up with
the total amount of P2.9M Due to the failure of Polymer to
comment or oppose despite notice, the LA approved said
amount.
On April 2005, the LA issued the 5 th Alias Writ of Execution,
commanding the sheriff to collect the amount. In its
implementation, the shares of stock of Joseph Ang at USA
Resources Corporation was levied.
Polymer and Ang moved to quash the writ and to lift the notice
of garnishment. They alleged that:
a) Ang should not be held solidarily liable with Polymer
since it was only the latter which was held liable in
the decision of the LA, NLRC and the SC.
b) The computation of monetary award in favor of the
complainants amounting to P2.9M was erroneous
c) The decision sought to be enforced by mere motion is
already barred by the statute of limitations.
LA granted the motion, and ordered the quashal and recall of
the writ of execution, as well as lifting the notice of levy on
Ang’s shares of stock. It ruled that the previous decision did
not contain any pronouncement that Ang was also liable. To
hold him liable at this stage when the decision had long
become final and executory will vary the tenor of the
judgment, or in excess of its terms. As to the extent of the
computation of the backwages, the same must only cover the
period during which the company was in actual operation.
Moreover, the motion to execute was already barred by the
statute of limitations.
NLRC affirmed the findings but modified the decision stating
that the Salamuding et al are not barred by the statute of
limitations.
Salamuding et al filed a Petition for Certiorari before the CA.
CA found merit with the petition, stating that there has to be a
responsible person working in the interest of Polymer who
may also be considered as the employer. Since Ang as the
director of Polymer was considered the highest ranking officer,
he was therefore properly impleaded and may be held
solidarily liable for the obligations of Polymer to its dismissed
employees. CA imputed bad faith when Polymer ceased its
operations the day after the promulgation of the SC resolution,
allegedly to evade liability. CA found it necessary to pierce the
corporate fiction and make Ang liable. CA ordered the
reinstatement of the writ of execution and the notice of levy on
the shares of stocks owned by Ang.
Polymer and Ang filed a petition claiming that:
Page 8 of 10
 1. Upon finality of decision, the same can no longer be
altered or modified;
2. Officer cannot be personally held liable and be made
to pay the liability of the corporation
3. Polymer cannot be made to pay salaries beyond the
existence of the company
4. Separation pay is only half month salary for every
year of service.
ISSUE: W/N Ang may be made liable
HELD: NO.GR: Obligations incurred as a result of the
directors’ or officers’ acts as corpo agents are not their
personal liability but that of the corpo. They are only held
solidarily liable with the corpo for the illegal termination of
services of EEs if they acted with malice or bad faith.
2 Requisites: (1) it must be alleged in the complaint that the
officer was guilty of gross negligence or bad faith; and (2)
there must be proof that the officer acted in BF. In the present
case, aside from the assertion that the closure was meant to
evade liability, there was no evidence showing that Ang was
responsible for the acts complained of. Moreover, it was highly
improbable that the corporation would cease its operations if
only to evade the payment of the monetary awards in favor of
3 EEs.
Ang is merely one of the incorporators and to single him out
and require him to personally answer for the liabilities is
without basis. In the absence of a finding that he acted with
malice or BF, it was error for the CA to hold him responsible.
Moreover, the judgment of LA, affirmed by the NLRC and
later the SC which had no pronouncement as to the liability of
Ang, became final and executory and can no longer be altered
even if it was meant to correct what is perceived to be an
erroneous conclusion of fact or law.
Computation of separation pay is only until the time Polymer
ceased operations.
Petition granted. Case remanded for proper computation.
___________________________________________
11. ALPS TRANSPORATION VS. RODRIGUEZ
698 SCRA 357
SERENO, CJ.:
FACTS:
Respondent Elpidio Rodriguez (Rodriguez) was
previously employed as a bus conductor. He entered into an
employment contract with Contact Tours Manpower and was
assigned to work with the bus company ALPS Transportation,
owned by Alfredo Perez as a sole proprietor.
During the course of his employment, Rodriguez was
found to have committed irregularities on 26 April 2003, 12
October 2003, and 26 January 2005. The latest irregularity
report dated 26 January 2005 stated that he had collected bus
fares without issuing corresponding tickets to passengers. The
report was annotated with the word "Terminate."
Rodriguez alleged that he was dismissed from his
employment on 27 January 2005, or the day after the issuance
of the last irregularity report. However, he did not receive any
written notice of termination. He went back to the bus
company a number of times, but it refused to readmit him.
Rodriguez then filed before the labor arbiter a complaint for
illegal dismissal.
In response to the complaint, ALPS and Perez stated
that they did not have any prerogative to dismiss Rodriguez, as
he was not their employee, but that of Contact Tours.
ISSUES:
1. Whether Rodriguez was illegally dismissed;
2. Assuming Rodriguez was illegally dismissed, whether ALPS
Transportation and/or Alfredo E. Perez is liable for the
dismissal.
RULING:
1.     Yes
2.     Yes.
For a dismissal to be valid, the rule is that the
employer must comply with both substantive and procedural
due process requirements. Substantive due process requires
that the dismissal must be pursuant to either a just or an
authorized cause under the Labor Code. Procedural due
process, on the other hand, mandates that the employer must
observe the twin requirements of notice and hearing before a
dismissal can be effected.
Evidence must, therefore, be substantial and not
based on mere surmises or conjectures for to allow an
employer to terminate the employment of a worker based on
mere allegations places the latter in an uncertain situation and
at the sole mercy of the employer. An accusation that is not
substantiated will not ripen into a holding that there is just
cause for dismissal. A mere accusation of wrongdoing or a
mere pronouncement of lack of confidence is not sufficient
cause for a valid dismissal of an employee. Thus, the failure of
the petitioners to convincingly show that the respondent
misappropriated the bus fares renders the dismissal to be
without a valid cause. If doubt exists between the evidence
presented by the employer and the employee, the scales of
justice must be tilted in favor of the latter.
Turning to the issue of procedural due process, both
parties agree that Rodriguez was not given a written notice
specifying the grounds for his termination and giving him a
reasonable opportunity to explain his side.
As to the contention of ALPS that Rodriguez is an
employee of Contact Tours, the presumption is that a
contractor is a labor-only contractor unless he overcomes the
burden of proving that it has substantial capital, investment,
tools, and the like. While ALPS Transportation is not the
contractor itself, since it is invoking Contact Tours status as a
legitimate job contractor in order to avoid liability, it bears the
burden of proving that Contact Tours is an independent
contractor.
However, aside from making bare assertions and
offering the Kasunduan between Rodriguez and Contact Tours
in evidence, ALPS Transportation has failed to present any
proof to substantiate the former's status as a legitimate job
contractor. Hence, the legal presumption that Contact Tours is
a labor-only contractor has not been overcome.
As a labor-only contractor, therefore, Contact Tours is
deemed to be an agent of ALPS Transportation. Thus, the latter
is responsible to Contact Tours' employees in the same manner
and to the same extent as if they were directly employed by the
bus company.
Finally, since ALPS Transportation is a sole
proprietorship owned by Perez, it is he who must be
held liable for the payment of backwages to
Rodriguez. A sole proprietorship does not possess a
juridical personality separate and distinct from that of
the owner of the enterprise. Thus, the owner has
unlimited personal liability for all the debts and
obligations of the business, and it is against him that a
decision for illegal dismissal is to be enforced.
___________________________________________
12. REPUBLIC GAS CORPORATION VS. PETRON
Page 9 of 10
 CORPORATION 698 SCRA 666 infringement; to which the corporate officers deny based on the
fact that REGASCO is a separate juridical entity from that of
the corporate officers.
Hence, this petition.

ISSUE:
(Corporation Law issue) One of the issues raised in this case is
whether or not the individual petitioners namely: ArnelUy,
Mari AntonetteUy, Orlando Reyes, Ferrer Suazo and Alvin Uy
should also be held liable for trademark infringement and
unfair competition, given that they are separate personalities
from that of the REGASCO?

Issue: Should the REGASCO corporate officers be
also held liable for the crimes?
Supreme Court says YES based on the following:
• The corporate officers themselves, who are in
direct control and supervision of the corporation
are knowledgeable of the fact that they caused the
corporation to commit a crime.
The existence of a corporate entity does not shield these
corporate officers from the crime only to escape criminal
liability.
FACTS:
COURT RULING:
The Court ruled in favor of respondents PETRON and SHELL,
and held REGASCO guilty of trademark infringement and
unfair competition.
However, with respect to the above-stated issue, the Court also
held the individual petitioners guilty based on the premise that
“corporate officers, who, through their act, default and
omission, also committed a crime, may themselves be held
individually liable for the crime”.
In the case at bar, the Court based its proposition on the sole
fact that that
these corporate officers (individual petitioners in this case),
being in direct control and supervision in the management and
conduct of the affairs of the REGASCO, must have known or
should have been aware that the corporation itself is engaged in
the act of refilling LPG cylinders bearing the marks SHELLANE
and GASUL from both trademark owners SHELL and
PETRON.
The existence of corporate entity does not shield from
prosecution the corporate agents who knowingly and
intentionally caused the corporation itself to commit a crime.
(In this case, the crime committed was trademark infringement
and unfair competition). Further, a corporate officer cannot
hide behind the cloak of separate corporate personality of the
corporation to escape criminal liability.A corporate officer
cannot protect himself behind a corporation where he is the
actual, present and efficient actor.

Respondents Petron Corporation (PETRON) and

Pilipinas Shell Petroleum Corporation (SHELL) are two of the
largest bulk suppliers and producers of liquefied petroleum gas
(LPG) in the Philippines.
PETRON owns the trademark GASUL cylinders used for its
LPG products. It
is the sole entity authorized to allow refillers and distributors to
refill, use, sell and distribute GASUL LPG containers, products
and its trademarks.
SHELL, on the other hand, is the authorized user of
SHELLANE cylinders in its production and distribution of
SHELLANE LPGs.
The case commenced when LPG Dealers’ Association of which
both respondents SHELL and PETRON belong received reports
that certain entities were engaged in unauthorized refilling, sale
and distribution of LPG cylinders, bearing their respective LPG
cylinder tradenames. Thus, they filed a complaint before the
NBI for an investigation regarding the illegal trading of
petroleum products.
An investigation was then conducted which showed that several
persons and establishments, including petitioner Republic Gas
Corporation (REGASCO) were suspected of violating B.P. 33, or
the law against illegal trading of petroleum products.
Surveillance then revealed that REGASCO unlawfullyengaged
in refilling the sale of LPG cylinders bearing the marks and
trademarks owned by PETRON and SHELL.
During the course of the trial, the Court of Appeals
held the corporation as well as the individual petitioners guilty
of the crimes of unfair competition and trademark
Page 10 of 10