FILIPINAS COMPAÑIA DE SEGUROS vs. CHRISTERN, HUENEFELD and CO., INC.

G.R. No. L-2294, May 25, 1951

DOCTRINE OF PIERCING THE VEIL OF THE CORPORATE ENTITY - 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. (Lanuza v. BF Corporation, G.R. No. 174938, 1 October
2014)

The separate personality was disregarded in the following cases:

1. The corporate personality is used to evade obligations to employees or used as a pretext to dismiss
employees;
2. The corporate personality is dominated by officers, stockholders or other persons or entity to the
extent that the corporation is a mere alter ego, adjunct, or business conduit;
3. The corporate personality is used to evade lawful obligations or a money judgment; or
4. The corporate personality is used to perpetuate deception or otherwise circumvent the law. (Land
Bank of the Philippines v. CA, G.R. No. 127181, 4 September 2001)

Does ownership of substantial portion of the outstanding capital in a corporation sufficiently justify
the application of the doctrine of piercing the corporate veil?

No, mere ownership by a single stockholder or by another corporation of all or nearly all of the capital
stock of the corporation does not justify the application of the doctrine. If the subsidiary is used to perform
legitimate functions, a subsidiary’s separate existence shall be respected and the liability of the parent
company as well as the subsidiary will be confined to those arising from their respective business. (MR
Holdings Ltd. V. Sheriff Carlos Bajar, G.R. No. 138104, 11 April 2002)

Can the doctrine of piercing the corporate veil be applied against a natural person?

Yes, the piercing of the corporate veil may apply to corporations as well as natural persons involved
with corporations. The Supreme Court has held in a long line of cases that the “corporate mask may be lifted
and the corporate veil may be pierced when a corporation is just but the alter ego of a person or of another
corporation.” (International Academy of Management and Economics v. Litton and Company, Inc., G.R. No.
191525, 13 December 2017)

FACTS: On October 1, 1941, respondent corporation, Christern Huenefeld, & Co., Inc obtained a fire insurance
policy to Filipina Compañ ia covering merchandise contained in its building in Binondo Manila. However,
during the Japanese military occupation, the building as well as the insured merchandise were burned.

Christern Huenefeld submitted its claim under the policy but Filipina Compañ ia refuses on the ground that
the policy ceased to be valid because the former became public enemy when the US declared war against the
Germany.

The CA overruled the contention that Christern Huenefeld became an enemy of the US.

ISSUE: WON Christern Huenefeld and co is a corporation of public enemy; and WON the insurance policy
issued in its favor ceased to be valid and enforceable

RULING: YES. Christern Huenefeld and co is a corporation of public enemy since the majority of stockholders
of the respondent corporation were German subjects. It became an enemy of the state upon the outbreak of
the war between US and Germany.
Under the Doctrine of piercing the corporate veil, A corporation was subject to enemy legislation when it was
controlled by enemies, namely managed under the influence of individuals or corporations themselves
considered as enemies…

The Philippine Insurance Law (Act No 2427, as amended), in Section 8, provides that “anyone except a public
enemy may be insured”. It stands to reason that an insurance policy ceases to be allowable as soon as an
insured becomes a public enemy.

The Christern Huenefeld having an enemy corporation on December 10, 1941, the insurance policy issued in
its favor on October 1, 1941, by Filipinas Compañ ia had ceased to be valid and enforceable, and since the
insured good were burned during the war, Christern Huenefeld was not entitled to any indemnity under said
policy from Filipinas Compañ ia. However, elementary rule of justice (in the absence of specific provisions in
the Insurance Law) require that the premium paid by the Christern Huenefeld for the period covered by its
policy from December 11, 1941, should be returned by the Filipinas Compañ ia.